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Cash flow statement analysis
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INTRODUCTION
Finance is the lifeblood of every business activity without which the wheels of
modern business organization system cannot be greased. Finance management is
managerial activity, which is concerned with planning and controlling of the firm’s
financial Resources. Finance is a scarce resource and it has to be managed efficiency for
the successful functioning of any company. Several companies have come to grief mainly
because of inefficient management of finance, in spite of other favorable conditions.
Cash flow statement is an important tool and is widely used in the hands of
financial analysts and managers for analyzing the financial management of a company.
Cash keep on moving in a business, which itself based on going concern concept. In a
narrow sense, it means inflow and out flow of
Cash only and a flow statement prepared on this basis is called as ”cash flow
statement”. Such a statement enumerates net effects of the various business transactions
on cash and takes into account receipts and disbursement of cash. In a broader sense, the
term fund refers to money values in whatever form it may exists. Here, cash mean. All
financial resources. But in a popular sense, the term cash means working capital i.e.,
excess of current assets over current Liabilities. The word fund here means net working
capital.
Definition:
“A statement of sources and Application of Cash is a technical device designed to
analyze the changes in the financial condition of a business enterprise between two
dates”.
1
NEED FOR THE STUDY
The sources of cash for a business could be from both the long term and short
term. Any business to survive and growth in the competitive market, cash are needed not
only to meet its long-term financial needs but also short-term requirements. The long-
Term sources comprising of share capital, long term debt inclusive of debentures etc.,
while the short term sources comprises of the short term loans, working capital collection
from commercial banks, loans from the call money market and among these fall the sales
which has two phases the cash sales and the credit sales.
The study is aimed at analyzing the financial position of panyam cements Private
Limited and also identifying the inflow and outflows of cash i.e., source and application
of cash.
This study will evaluate the way of the firm’s financial condition how effectively
the cash are mobilized and utilized in the company for the financial year ending 31-03-
06,31.3.07, 31.3.08 ,31-03-09, 31.3.10,and31-03-2011. This study will thus help the
company in maintaining better financial performance, which is followed by a blend of
findings and suggestions.
2
1.1 STATEMENT OF THE PROBLEM: Cash is the basic input needed to keep the operations of the business going
on the continuous basis. So every business unit should always try to keep sufficient cash,
neither more nor less because shortage of cash will threaten the firms liquidity and
solvency, whereas excessive cash will not be fruitfully utilized will simply remain idle
and will effect the profitability of a concern. Cash flow analysis reveals the various
outflows and inflows of cash during a particular period.
With the help of the cash analysis, one can determine
What are the sources of cash inflows and outflows?
The cash ability and position of the firm.
How the firm utilizing the cash and cash equivalents.
So the cash flow analysis helps to determine the future cash flows and the ability
to pay dividends and other commitments and the efficiency of cash management. So I
choose the cash flow analysis in Zuari cement limited.
3
Scope of Study:
Firm create manufacturing capacities for production of goods some provide
service to customers. They sell their goods or services to earn profit. They raise funds to
acquire manufacturing and other facilities. Thus the three most important activities of
business firm are:
Production
Marketing
Finance
A firm as wheat ever capital it needs and employees it (finance activity) in
activities which generate returns on invested capital (production and marketing
activities).
So financial management helps to the firm to take the correct decisions. And
also helpful to firm how to utilize the economic resources likely capital funds in the
proper way. It is also controlling tool to control the financial functions of the firm. So it is
very important aspect in every organization.
4
STATEMENT OF THE PROBLEM & HYPOTHESIS
It is proposed to analyze the liquidity position of the company and also the timing
of availability and requirement of cash to match or not.
The problem of the statement is difference between the two shows (i.e., sources
and applications of study) the net change in the working capital during the period.
It is assumed that bad payment collection system do not lead to optimization of
inflow & outflow of cash and profits in the company.
It is general principal followed by the financial managers all over the world that
the inflows of cash are classified as long- term and short –term. It is imperative that the
business enterprise uses long –term cash for long – term purpose and short-term cash for
short-term purposes.
However a firm, which uses long – term cash for long – term purposes, will have
lot of business problem. The reason for this is the long – term cash proposed by the
company generally as a fixed cost to it.
In case, if this cash are not utilized for long -term purpose to generate cash, the
company will have to pay interest without matching income thus leading to mismatch of
cash inflow and cash outflows .
5
Objectives of the study:
1. To review the literature of cash flow analysis;
2. To evaluate the sources and applications of cash of Zuari cement limited;
3. To study the operating, financing activities of cash inflows and outflows of the firm.
4. To find out the operating efficiency of the organization.
5. To measure the overall financial performance of Zuari cements Private Limited.
6. To offer suitable suggestions for better performance of the company.
6
Methodology:
1. Sources of data:
1. Primary data.
The study of cash flow analysis is basis on primary data as well as secondary data.
2. Secondary data:
The secondary data are those which have been already collected by
some agency on which have been processed. The secondary data is obtained from manual
reports and financial statements i.e., balance sheet and profit and loss account, annual
reports and additional data.
LIMITATIONS:
In spite of various uses of cash flow statement, it has the following limitations:
1. Cash flow statement gives the main of inflow and outflow of cash only and does not
Show the liquidity position of the company.
2. This statement is not a substitute of income statement which shows both cash and non-
items. Therefore, net cash flow does not necessary mean net income of the business.
3. It cannot replace funds flow statement as it cannot show the financial position of the
concern in totally.
7
CEMENT INDUSTRY PROFILE
1. INTRODUCTION
Cement industry has been decontrolled from price and distribution on 1st march
and de-licensed on 25th July 1991. However, the performance of the industry, the
constraints faced by the industry are interviewed in the infrastructure co-ordination
committee meeting held in the cabinet secretariat under the chairmanship of secretary.
The committee on infrastructure also reviews its performance. The industry is subject to
equality order issued on 17-02-2003 to ensure quality standards.
1.1 CEMENT INDUSTRY HISTORICAL PERSPECTIVE
Cement industry is one of the major and oldest established manufacturing
industries in the modern sector of Indian economy. It is an indigenous industry in which
the company is well endowed with the necessary raw materials, skilled manpower and
equipment & machinery technology.
Firms, bridges, buildings, water supply projects, dams, roads, hydroelectric power
projects, seaports, airports, and irrigation schemes require cement. It is thus a vital
industry, which assumes a crucial part in the economic development of the country, thus
it regards as major nation building industry whose importance in a developing economy
never be over emphasized. The Greek civilizations use some of mortar but Romans has
developed it. When one speaks about the cement industry, it invariably refers to Portland
cement, which has its origin in England, but until the 19th century a mixture of limestone
with Pozzoland of volcanic earth was known as cement. The first cement factory was
established around 1890 in both Canada and Australia, while it was invented in 1884 in
New Zealand.
The Cement industry occupies a position of predominance not only an
infrastructure for development but also it is 8th largest in the world, which directly
employs about millions of persons.
8
CEMENT INDUSTRY IN INDIA
In India it came to be establishing during the beginning of 20th century. In fact the
cement era in India commenced with the establishment of a small cement factory at
WASHERMANPET in 1904 by south India industry Ltd, a company that dates to 1879.
There was sufficient demand for that product, but because of technological defects and
inadequate supply of raw materials, the plant did not operate economically, a later on
collapsed. India is ranked 4th in the world after China, Japan and USA in cement
production. Yet the per-capital consumption of cement in India however low at 70 to 80
kgs against the world average of around 220 kgs.
Cement industry in India is 8 th decades old. However, the growth has not kept
pace with period of its existence. Decades of the government control have restricted the
growth of the industry. The real foundation stone of the present industry was laid in the
year 1942, when a small factory was established Porbandar in Kaythiwar by India cement
Limited. This factory commenced its production in 1914 at the rate of 199 metric tones
per day. This company adopted “dry process”. This plant had easy access of lime stone
quarries of Porbandar. The initial attempt could cause the attempt of two or more
factories. One at Kanthi (MP) another at Lakhier (Rajastan). The government control was
lifted immediately after the world war and the boom period of the industry started. The
demand for cement increased very steadily as the cement was used was used not only for
housing but also for dams, roads, bridges and other developed activities.
INDIAN CEMENT SECTOR
The boom in the housing market has given birth a higher demand in India
cement. The present initiatives under taken by the Government for infrastructure
development has also raised the demand for cement in the country. The cement
companies such as Ultratech, ACC, GACL and Grasim have grown in the country.
9
The planned capacities of production of Indian Cement Companies are as
follows:
1.4 CAPACITIES OF PRODUCTION BY COMPANIES
Company Name Location
(By State)
Additional
Capacities
(In mn tones)
Commissioning
Date
JP Associates Himachal Pradesh 4.55 Dec, 2008
Grasim Kothputali,
Rajasthan 4.08 FY 10 Q1
JP Associates Uttar Pradesh 3.34 FY 2009
Ultra Tech Cement Andhra Pradesh 3.19 Q1 FY 2010
OCL Orissa 3.04 Q1 FY 2010
JK Cement Karnataka 3.00 Sept 2009
Binani Cement Rajasthan 2.57 Dec 2007
JP Associates Madhya Pradesh 2.00 Q3 FY 2009
Zuari Cement Andhra Pradesh 1.98 H1 FY 2010
Penna Cement Andhra Pradesh 1.63 H1 FY 2010
ACC Lakheri Rajsthan 0.94 Dec 2007
Madras Cements Tamil Nadu 1.84 H1 FY 2010
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TYPES OF CEMENT IN INDIA
The types of cement in India have increased over the years with the
advancement in research, development, and technology. The Indian cement industry is
witnessing a boom as a result of which the production of different kinds of cement in
India has also increased.
By a fair estimate, there are around 11 different types of cement that are being
produced in India. The production of all these cement varieties is according to the
specifications of BIS.
Some of the various types of cement produced in India are:
Clinker Cement
Ordinary Portland Cement
Portland Blast Furnace Slag Cement
Portland Pozzolana Cement
Rapid Hardening Portland Cement
Oil Well Cement
White Cement
Sulphate Resisting Portland Cement
In India, the different types of cement are manufactured using dry, semi-dry, and
wet processes. In the production of Clinker Cement, a lot of energy is required. Using
materials such as limestone, iron oxides, aluminum, and silicon oxides produces it.
Among the different kinds of cement produced in India, Portland Pozzolana Cement,
Ordinary Portland Cement, and Portland Blast Furnace Slag Cement are the most
important because they account for around 99% of the total cement production in India.
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COMPANY PROFILE
This cement division project in 1978 and according to the Texmaco it has taken
the steps for acquiring the land at YERRAGUNTLA in KADAPA dist. in 1982.
Constructing activity is started and the cement plant is completed in March 1985.
Texmaco is started production at clinker by March 1985. Original plant capacity was 5
lakh tones per annum at first.
The Zuari cement is strategically located at Yerraguntla. The plant location
existence of 6km from Yerraguntla. It is connected to the railway station on by a railway
track of 7 km length and is having on exchange plant inside the factory; plant is
connected to the nearest highway by 0.2 km land private load.
Basically this is belongs to DR.K.K. Birla. In 1994 January 1, this cement unit of
Texmaco being handed over to Zuari agro chemical industry. Under working agreement
on 7-2-95. This unit is sold by Texaco to Zaire in 1997 company has conceives expansion
project investing 370 crores and making increasing rated capacity from 5 lakh to 7 lakh.
This project was completed by formally 1999 and in fact from
1-4-2000. Company entered in agreement with joint venture partner with Italy cement
with 50% of partnership and working agreement.
The Group has strength of 22,300 employees’ worldwide.
• 62 cement plants.
• 14 Grinding Units.
• 4 stand alone terminals.
• 147 aggregate quarries.
• 575 concrete batching units.
Part of the prestigious Dr.K.K.Birla Group a Rs 4000 crores conglomerate
Zuari cement as within a short time span made its presence felt in the cement industry. Itv
has done so by making top quality cement.
Consistently, Cement that has won the confidence and trust of millions in the
country. This commitment to quality has being it grow from a modest 0.5 million ton
capacity in 1995 to 2 million tons today.
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Zuaries quality drive originates in its state of the are cement plant, situated at
yerraguntla, Renewed for rich Narji limestone deposits, this plant is cement
manufacturers envy. Yet, strategic location is just factor contributing to Zuaries success.
There are other equal important reasons.
Superior work force.
Cutting-edge technology.
Decentralized quality assurance teams.
All this combine seamlessly to ensure that every bag org cement. That leaves the
plants is of consistent quality, and worthy of bearing the Zuari label. World Wife
excellence with italcementi. Zuari industries ltd has entered into 50:50 joint venture with
italcementi group, the largest producer and distributer of cement in Europe and one of the
leaders in cement production in the world. Italcement operates in 19 countries including
Canada, France, Italy, Morocco, USA and Bulgaria. Italic cements global industrial
network includes more than 50 cement plants, 500 concrete batching units 150 quarries.
History of zuari cements:
Zuari cement was started in 1994 to operate the cement plant of Texmaco Ltd.
Subsequently, Texmacos cement business was taken over by the company in 1995. Zuari
cements manufacturing facility at yerraguntla in Andhra Pradesh is one of the largest in
south India and places Zuari cement among the top 5 manufacturers in the south. In 2000,
Italcementi group the second largest producer and distributor of cement in Europe and
fifth largest cement producer in the world enter into a joint venture with Zuari cement
and Zuari cement Limited was formed.
COMPETITORS:1. CORAMANDAL CEMENT
2. MAHA CEMENT
3. NAGARJUNA CEMENT
4. LANCO CEMENT
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5. ULTRATECh CEMENT
Some of the other cements companies. All cement companies are competitors.
Joint venture with Ital cement:
The scenario of mergers and acquisitions is still vast in the cement industry. The
entry of May multinationals. The other MNC’s planning to enter the Indian market and
consolidation of the companies in India has been forcing mergers in the cement industry.
Now company is under joint venture having rated capacity of 17 lakhs per annum. Ital
cements group CCB’s mother company ( Companies des cements ), and the Zuari
Industries Ltd (ZIL) of India have reached an agreement to create a 50:50 joint venture
which will assume the cement activities of ZIL, consisting of the cement plant of
yerraguntla, in Andhra Pradesh.
Ital Cement Group:
OUR MISSION:-“Our shared ambition: Effective and Efficient”
To become the most effective and most efficient cement manufacturer and
distributor in the world.
OUR APPROACH: We are local, we think global
Cement aggregates and ready mixed concrete manure and distribution are local
business. Around the world we serve local customers in local market with local needs.
OUR WAY OF WORKING: Technological leadership is our goal,
Our technology plays the key role in realizing our ambition we are committed to
increasing the value of our group, our companies, our products and services, the
capabilities of our employees and the ecological standards by which we operate.
OUR SPIRIT: One team worldwide.
We operate worldwide in many diverse markets, culture and continents. We are
proud of our cultural diversity and our distinctions character.
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Location of the plant:
Cement and its raw materials namely coal and lime stone, are all bulky that make
transportation difficult and uneconomical. Given this, cement plants are located close to both
sources of raw materials and markets. Most of lime stone deposits in India are located in Madhya
Pradesh, Rajasthan, Andhra Pradesh, Maharashtra and Gujarat. There is a trade-off between
proximity to markets and proximity to raw materials due to which some cement plants have been
setup near big markets despite lack of raw materials. Zuari cement industries ltd., is located at
Krishna Nagar, in Yerraguntla, Kadapa district. It was nearest to the railway station and also nearest
to the road. It was 6 km distance to yerraguntla.
Location of the plant at this place is having the following advantages. Location in
industrial belt of Rayalaseema with sophisticated facilities like water.
Present of best suited limestone proved scientifically for cement.
Low free limestone to ensure reduce surface cracks.
Low heat of hydration from better soundness.
Low magnesia content to ensure reduced tensile cracks.
Specially designed setting time to suit Indian working conditions.
PRODUCTION: Cement production during the period has also increased from about 72.23
million tons about 90 million tons in 2005-2006 excluding the contribution of mini
cement plants.
RAW MATERIALS:
The actual requirements of raw material at 100% capacity utilization would be;1. 12.5 million tons of limestone per annum.
2. 70000 tons of Gypsum per annum.
3. 39000 tons of Bauxite per annum.
4. 20000 tons of Iron ore per annum.
15
The limestone is major component required for the plant is net from the mines located
adjacent to the proposed site.
1. Gypsum is procured from fertilizer factories at Madras and Cochin.
2. Iron is soured partly from mini steel plants located at Tirupathi and partially from
Bellary.
3. Bauxite is procured from Goa, Karnataka and Maharashtra.
POWER:
Maximum estimated power demand is 45 M.V. The company has an existing contract 50
M.V demands APSEB, the plant presents has D.G sets with an aggregate general capacity of 12.6
M.V.
WATER:
Water is required for seeds of consumption make for plant and machinery for general need
in plant. Company has a pumping station and underground bore wells near Hanuman Gutta village
at Penna River to tap the undergrounds water in riverbed.
TRANSPORT:The factory is when connected to different part of the country through rail and
road facilities is near to Yerraguntla railway station and has a railway lint to the factory
with an extern point within the factory premises 605 of the cement is dispatched by rail
gal is received through rail. The plant is connected to the nearest state highway to
Bangalore, Hyderabad and Chennai.
MANPOWER:Existing plant has a total of 500 employees. After an addition of employees may
be required.
QUARRY:It is situated adjacent to the factory. It constituted limestone, one of the major materials for
cement industry. The quarry has a mining base area of 1027.56 acres.
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S.No DescriptionMassive(MT)grade limestone
Flaggedstone(MT)
Total (MT)
1 Total reserves of limestone36 blocks 108442 9.894 118.36
2 Un workable limestone dueto mining obstacles 29530 2540 32.07
3 Workable reserves 79912 7354 86.266
Chambal fertilizers and chemicals ltd (CFCL) promoted by Zuari industries ltd., has set up a
large gas based area manufacturing plant at Gadapan about 35 km from Keta, a major industrial
town of Rajasthan state in India.
CFCL’s plant is a state-of-the-are-high-tech complex built at a cost of Rs.12.67 billions.
Spread over an area of 1105 acres (or 447 hectares 4.47 sq.kms), containing the manufacturing units
offsite facilities including captive power plant, railways siding and amenities like residential
complex, club, school, etc in a pleasant and green surroundings snamprogetti of Italy and Haldor
topsoe of Denmark provided the technical know-how and Engineering and other services for
Ammonia and urea plant while off-site facilities were built mainly by Tokyo engineering India ltd.
The enterprise value of the unit has been pegged at Rs. 740 crores. The creation of this joint venture
company is a new step in the international of the Ital cement group in Asia.
It is a new opportunity for the group, to further increase its presence in the emerging
countries by entering the promising Indian market, the third largest in the world. In combination
with a very important partner says a release issued by laggard who advised ital cement on the deal.
Here are 6 of the many reasons why Zuari 53 grade and 43 grades cement edges out its
competitors.
1. High compressive strengths.
2. Low heat of hydration.
3. Better soundness.
4. Lesser consumption of cement for M-20 concrete grade and above.
5. Faster de-shuttering of formed work.
6. Reduced construction time.
17
With a superior and wide range of cement catering to very conceivable building
need, Zuari cement is a formidable player in the cement market. Here are just a few
reasons why Zuari cement is chosen by millions in India.
Ideal raw materials
Low time and magnesia content and high proportion of silicates
Greater fineness
Slow initial and fast final setting
Wide range of application
Quality customer service
A wide range to address every need: Residential, commercial, multistoried buildings and complex.
Mass concreting-dams, canals, spillways
Construction and repair of pavements, roads, flyovers and runways.
Spun pipes and poles manufacturing
Cold weather concreting
Pre-fabricated elements such a pipes, sleepers, windows, door frames etc.
Quality customer service:In an effort to reach out to customers better, Zuari cement as set up a technical
cell named Zuari home partner. This cell gives guidance in the field of building.
Technology, architecture, housing finance and economical usage of the high quality.
Technical experts provide the assistance according to the individual requirements. So that
customers get the best value for the investment they have made.
Products
Zuari Cement manufactures and distributes its own main product lines of
cement .We aim to optimize production across all of our markets, providing a complete
solution for customer's needs at the lowest possible cost, an approach we call strategic
integration of activities. Cement is made from a mixture of 80 percent limestone and 20
percent clay. These are crushed and ground to provide the "raw meal”, a pale, flour-like
powder. Heated to around 1450° C (2642° F) in rotating kilns, the “meal” undergoes
18
complex chemical changes and is transformed into clinker. Fine-grinding the clinker
together with a small quantity of gypsum produces cement. Adding other The culture of
quality that has always prevailed in Zuari Cement's manufacturing facilities is best
exemplified in the process technology employed.
Zuari Cements range of cement
Advanced technology methods are used to ensure that a high level of quality is attained
and sustained right through the manufacturing process. Yet, these high standards are
constantly improved upon by an experienced and dedicated R&D team to attain
performance oriented cement.
Centralised On-line Process Control
The process Technology Advantages
Complete homogenization of limestone is achieved by stacking the limestone in
stock-plies with the use of stackers and reclaiming it through reclaimers.
The optimum ratio of raw mix is attained by the use of X-ray analyzer and automatic
weigh feeder which are linked to the centralized computers control room.
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Online X-ray Analyser Stacker and Reclaimer
Reduced variability in kiln feed and complete homogenisation of raw meal is attained
through Continuous Flow Silo. This ensures that every grain of cement is of
consistent quality.
Vertical Raw Mill Continuous Fluidised Silo
The totally computerized monitoring system enables quality clinkerisation. It dictates
the optimum retention time in the precalciner and the kiln. Equipped with a six stage
double stream pre-heater cyclone system, the precalciner only adds to the quality.
The modern closed grinding units have a high efficiency separator that produces finer
particles of cement. This yields cement matrix with a lower pore diameter. This in
turn gives concrete of higher density and lower permeability.
Ventomatic Electronic Packing Zuari Cement employs Ventomatic packers to ensure that the customer gets excatly 50
kgs per bag. To minimize damages during transport, advanced loading techniques are used.
These steps reflect Zuari Cement's commitment to offer the best quality and correct quality to
its customers.
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Environment-Friendly Technology To minimize dust emission, Zuari Cement has installed the latest pollution control
equipment such as electrostatic precipitators in the kiln, raw mills, coal mills and cement
mills. this environmental friendly aspect of Zuari's process technology has resulted in
abundance of greenery and clean air in the factory premises.
THEORITICAL BACKGROUD
INTRODUCTION TO FINANCIAL MANAGEMENT:
In the earlier years of its evaluation it was created rising of funds. In the current
year literal pertaining to financial management a border scope. So as to include in
21
additional to procurement of funds efficient of funds efficient of resources in universally
recognized. The term nature as applied to financial management refers to its relationship
with the closely related fields of economics and accounting its functions, scope.
DEFINITIONS: “Financial management is concerned with the efficient use of an important
economic resources namely capital funds”. –Solomon.
“Financial management is the application of the planning and control
function to the finance functions”. –Howard and Upon
Finance functions: It may be difficult to separate the finance functions from production,
marketing and other functions, but the functions themselves can be readily identified. The
functions of raising funds, investing them in assets and distributing returns earned from
assets to shareholders are respectively known as financing decision, investing decision,
and dividend decision. A firm attempts to balance cash inflows and outflows while
performing these functions. This is called liquidity decision, and we may add it to the list
of important finance decisions or functions.
Thus finance functions include;
1. Long term asset-mix (or) investment decision.
2. Capital-mix (or) financing decision.
3. Profit allocation (or) dividend decision.
4. Short term mix asset-mix (or) liquidity decision.
Meaning and types of financial statements:A financial statement is an organized collection of data according to logical and
consistent accounting procedures. It purposes is to convey in understanding of some
financial aspects of a business firm. Thus, the term ‘financial statements’ generally refers
to two basic statements.
1. Income statement
2. Balance sheet
1. Income Statement:
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The income statement may be prepared in the form manufacturing account to find
out the cost of the production, in the form of trading account to determine the gross loss
in the form of profit & loss account to determine the net profit or net loss
If the profit is increasing year after year or it is higher than the other competitors,
it means the business is a profitable one. Otherwise it is better to switch over to other
lines or to close down. Similarly if the expenditure is more than the income then there
will be no loss. It means that the firm is losing the capital.
2. Balance sheet:The balance sheet is one of the Important statement which shows the financial
position of the firm, measured in terms of assets & liabilities i.e., Balance sheet shows all
the assets owned by the firm on one side and on other side owners funds and other
external liabilities. The difference between the total assets and the external liabilities is
known as “Owners Equity”. If the owner’s equity is increasing over a period of time, it
means. Otherwis3 it will be a cause of financial insolvency.
Nature of financial statements:
Financial statements are prepare for the purpose of presenting a periodical review
are report by the management and deal with the state of investment in business and result
achieved during the period under review.
From this it is clear that financial statements are affected by three things.
1. Recorded facts
2. Accounting conventions
3. Personal judgments.
OBJECTIVES OF FINANCIAL STATEMENTS:-
Financial; statement are the sources of information on the basis of which
conclusions are drawn about the profitability and financial position of a concern. The
primary objective of the financial statement is to assist in decision making to those who
are interested in the financial affairs of the business enterprise. The Accounting
23
Principles Board of America (APB) state that following objectives of financial
statements.
To provide reliable financial information about economic resource and obligation
of a business firm i.e., cash inflows and cash outflows.
To provide other needed information about changes in such economic resource
and obligations.
To provide a financial information the assist in estimating the earning of
potentials of the business.
To provide information about the working capital and other funds flow.
To disclose, to the extent possible, other information related to the financial
statements that is relevant to its users.
Techniques (tools or methods) of analysis and interpretation: The following techniques can be used in connection with analysis interpretation of financial statements:
1. Comparative financial statements (or analysis)
2. Common measurement statements (or analysis)
3. Trends percentages analysis
4. Funds flow statement (or analysis)
5. Net working capital analysis
6. Cash flow statement (or analysis)
7. Ratio analysis.
24
CASH FLOW ANALYSIS
INTRODUCTION:Cash is the basic input needed to keep the operations of the business going on a
continuing basis; it is also the final output expected to be realized by selling the product
manufactured by the manufacturing unit. Cash is both the beginning and the end of the
business operations.
Sometimes, it so happens that a business unit earns sufficient profit, but inspire of
this is not able to pay its liabilities when they become due. Therefore, a business unit
should always try to keep sufficient cash, neither more nor less because shortage of cash
will threaten the firm’s liquidity and solvency, whereas excessive of cash will not be
fruitfully utilized, will simply remain idle and will affect the profitability of a concern.
Effective cash management, therefore, implies a proper balancing between the two
conflicting objectives of liquidity and profitability.
The management of cash also assumes importance because it is difficult to predict
cash inflows and outflows accurately and there is no perfect coincidence between the
inflows and outflows of cash giving rise to either cash outflows exceeding inflows or
cash inflows exceeding cash outflows. Cash flow statement is one important tool of cash
management because it throws light on cash inflows and cash outflows of a particular
period.
MEANING OF CASH FLOW ANALYSIS:
A cash analysis is more useful because it gives detailed information to the
management about the sources of cash inflows and outflows. Cash flow analysis means
to reveal the cash outflows and cash inflows in a particular period. An analysis of cash
flows is useful for short-run planning.
DEFINITION OF CASH FLOW ANALYSIS:A cash flow analysis can be defined, “As a statement which summaries sources of
cash inflow and of cash outflows of a during a particular period of time, say a month or a
25
year” Such statement can be prepared from the data made available from comparative
balance sheets, profit and loss account and additional information.
It is an essential tool short-term financial analysis and is very helpful in the
evaluation of current liquidity of a business concern. It helps the business executives of a
business in the efficient cash management and internal financial management. It is
evaluating the cash inflows and out flows of company’s during a particular period. It
reveals the cash position of the company.
OBJECTIVES OF CASH FLOW ANALYSIS:
1. The economic decisions that are taken by users require an evaluation of the
ability of an enterprise to generate cash and cash equivalents and the timing
and certainty of their generation.
2. It deals with the provision of information about the historical changes in cash
and cash equivalents of an enterprise by means of a cash flow statement
which classifies cash flows during the period from operating, investing and
financing activities.
3. Information about the cash flows of an enterprise is useful in providing users
of financial statements with a basis to assess the ability of enterprise to
generate cash and cash equivalents and the needs of the enterprise to utilize
those cash flows.
SCOPE OF CASH FLOW ANALYSIS:
1. An enterprise should prepare a cash flow statement and should present it for each
period for which financial statements are presented.
2. Users of an enterprise’s financial statements are interested in how the enterprise
generates and uses cash and cash equivalents. This is the case regardless of the
nature of the enterprise’s activities and irrespective of whether cash can be
viewed as the product of the enterprise, as may be the case with a financial
enterprise.
Enterprises need cash for essentially the same reasons, however different their
principal revenue-producing activities might be. They need cash to conduct their
operations, to pay their obligations, and to provide returns to their investors
26
USEFULLNESS OF CASH FLOW ANALYSIS:
1. Predicts future cash flows.
2. Determines the ability to pay dividends and other commitments.
3. Shows the relationship of net income to changes in the business cash.
4. Efficiency in cash management.
5. Discloses movement of cash.
6. Discloses success or failure of cash planning.
7. Evaluate management decisions.
8. Enhances the comparability of reports.
1. Predicts future cash flows: This statement is often used as an indicator of the amount, timing and
certainty of future cash flows and the basis of what happened in the past. This approach is
better than accrual basis data presented by profit and loss account and balance sheet.
2. Determines the ability to pay dividends and other commitments:
This statement indicates the sources and uses of cash under operating,
investing and financing activities, helps shareholders to know whether the business can
make the payment of amount of dividends on their investment in shares and creditors to
receive interest and principal amount in time.
3. Shows the relationship of net income to changes in the business cash: Generally there is direct relation between net income and cash. High net
income leads to increase in cash and vice versa. But there may be a situation where a
company’s net income is high but decrease in cash balances and increase in cash balance
when net income is low. Every user is interested to know the reasons or difference
between the net income and net cash provided by operations. The net income generally
tells the progress of the business while cash flow relates to the liquidity of the business.
The users are helped to assess the reliability of net profit with the help of this statement.
27
4. Efficiency in cash management: This statement is very useful to the management in evaluating financial
policies and cash position. It will help the management to make the reliable cash flow
projections for the immediate future and will tell surplus or deficiency of cash so that
management may be able to make plan for investment of surplus cash or to tap the
sources where from the deficiency is to be met. Thus it is an important financial tool for
the management as it helps in the efficient cash management.
5. Discloses movement of cash: Previous year cash flow statement when compared with the budget of that
year will indicate as to what extent the resources of the enterprise were raised and
applied. Actual results when compared with the original forecast may highlight the trend
of the movement of cash that may otherwise remain undetected.
6. Discloses success or failure of cash planning: A comparison of projected cash flow statement with the actual cash flow
statement will reveal the success or failure of cash planning and if case in failure,
necessary remedial steps can be taken to improve the position. It also provides a better
measure for inter period and inter firm comparison.
7. Evaluate management decisions: This statement, by providing information relating to companies investing
and financing activities, gives the investors and creditors about cash flow information
which help them to evaluate management decisions.
8. Enhances type comparability of report: It enhances the comparability of the reporting of operating performance by
different enterprises, because it eliminates the effect of using different accounting
treatment for the same transactions and events.
28
LIMITATIONS OF CASH FLOW ANALYSIS:
In spite of various uses of cash flow statement, it has the following limitations:
1. Cash flow statement gives the main of inflow and outflow of cash only and does not
show the liquidity position of the company.
2. This statement is not a substitute of income statement which shows both cash and non-
items. Therefore, net cash flow does not necessary mean net income of the business.
3. It cannot replace funds flow statement as it cannot show the financial position of the
concern in totally.
MOTIVES FOR HOLDING CASH:
The firm’s need to hold cash may be attributed to the following three motives;
1. The Transactions Motive
2. The Precautionary Motive
3. The Speculative Motive
4. The Compensation Motive.
1. The Transactions Motive: An important reason for maintaining cash balances is the transactions
motive. This refers to the holding of cash, to meet routine cash requirements to finance
the transactions which a firm carries on in the ordinary course of business. A firm enters
into a variety of transactions to accomplish its objectives which have to be paid form in
the form of cash. For example, cash payments have to be made for purchases, wages
operating expenses, financial charges, like interest, taxes, dividends, and so on.
Similarly, there is a regular inflow of cash to the firm from sales
operations, returns on outside investments, etc. These receipts and payments constitute a
continuous two way flow of cash. But the inflows (receipts) and outflows
(disbursements) do not perfectly coincide or synchronies, that is they do not exactly
match. At time’s, receipts exceed outflows while, at other times, payments exceed
inflows. To ensure that firm can meet its obligations when payments becoming due in a
29
situation in which disbursements are in excess of the current receipts, it must have an
adequate cash balances.
The requirement of cash balances to meet routine cash needs is known as
the transactions motive at such cash balances are termed as transaction balances. Thus,
the transaction motive refers to the holding of cash to meet anticipated obligations whose
timing is not perfectly synchronized with cash receipts. If the receipts of cash and its
disbursements could exactly coincide in the normal course of operations, a firm would
not need cash for transaction purposes. Although a major part of transaction balances are
held in cash, a part may also be in such marketable securities whose maturity confirms to
the timing of the anticipated payments, such as payment of taxes, dividends, etc.
2. The precautionary motive: In addition the non-synchronization of anticipated cash inflows and
outflows in the ordinary course of business, a firm may have to pay cash for purposes
which cannot be predicted or anticipated. The unexpected cash needs at short notice may
be result of;
Floods, strikes and failure of important customers;
Bills may be presented for settlement earlier than expected;
Unexpected show down in collection of accounts receivable;
Sharp increase in cost of materials.
The cash balances held in reserve for such random and unforeseen
fluctuations in cash flows are called as ‘precautionary balances’. In other words, a
precautionary motive of holding cash implies the need to hold cash to meet unpredictable
obligations. Thus, precautionary cash balance serves to provide a cushion to meet
unexpected contingencies.
Another factor which has a bearing on the level of such cash balances is the
availability of short term credit. If firm cash borrow at short notice to pay for unforeseen
obligations, it will need to maintain a relatively small balance and vice -versa. Such cash
balances are usually held in the form of marketable securities so that they earn a return.
3. The speculative motive: It refers to the desire of a firm to take advantage of opportunities which present
themselves at unexpected moments and which are typically outside the normal course of
business. While the precautionary motive is defensive in nature, in that, firms must take
30
provisions to tide over unexpected contingencies, the speculative motive represents a
motive represents a positive and aggressive approach.
Firms aim to exploit profitable opportunities and keep cash in reserve to do so. The
speculative motive helps to take in advantage of.
An opportunity to purchase raw materials at a reduced price on payment of
immediate cash;
A chance to speculate to interest rate movements by using securities when
interest rates are expected to decline ;
Delay purchases of raw materials on the anticipation of decline in prices; and
To make purchases at favorable prices.
4. Compensative motive:
Another motive to hold cash balances is to compensate banks for providing
certain services and loans.
Banks provide a variety of services to business firms, such as clearance of
cheque, supply of credit information, transfer of funds, etc. While for some of the
services banks charge a commission or fee, for others a seek indirect compensation.
Usually, clients are required to maintain a minimum balance of cash at the bank. Since
this balance cannot be utilized by the firm for transaction purposes, the banks themselves
can use the amount to earn a return.
CLASSIFICATION OF CASH FLOWS:
Cash flows for a period can be classified into the three categories of cash inflows
and cash out flows as given below:
Cash flows from operating activities
Cash flows from investing activities
Cash flow from financing activities
1. CASH FLOW FROM OPERATING ACTIVITIES:
The amount of cash flows arising from operating activities is a key indicator of
the extent to which the operations of the enterprise have generated sufficient cash flows
to maintain the operating capability of the enterprise, pay dividends, repay loans, and
make new inventions without recourse to external sources of financing. Information
31
about the specific components of historical operating cash flows, in conjunction with
other information, in forecasting future operating cash flows.
Cash flows from operating activities are primarily derived from the principal
revenue-producing activities of the enterprise. Therefore, they generally result from the
transactions and other events that enter into the determination of net profit or loss.
Examples of cash flows from operating activities are;
Cash receipts from the sale of goods and the rendering of services;
Cash receipts from royalties, fees, commissions, and other revenue;
Cash payments to suppliers for goods and services;
Cash payments to and on behalf of employees;
Cash receipts and cash payments of an insurance enterprise for premiums and
claims, annuities and other benefits;
Cash payments or refunds of income taxes unless they cash be specifically
identified with financing and investing activities; and
Cash receipts and payments relating to future contracts, forward contracts, option
contracts, and swap contracts when the contracts are held for dealing or trading
purposes.
Some transactions, such as the sale of an item of plant, may give rise to a gain or
loss which is included in the determination of net profit or loss. However, the cash flows
relating to such transactions are cash flows from investing activities.
An enterprise may hold securities and loans for dealing or trading purposes in
which case they are similar to inventory acquired specifically for resale. Therefore, cash
flows arising the purchases and sale of dealing or trading securities are classified as
operating activities. Similarly, cash advances and loans made by financial enterprises are
usually classified as operating activities since they relate to the main revenue producing
activity of that enterprise.
32
II. CASH FLOW FROM INVESTING ACTIVITIES:
The separate disclosure of cash flows arising from investing activities is important
because the cash flows represent the extent to which expenditures have been made for
resources intended to generate future income and cash flows. Examples of cash flows
arising from investing activities are;
Cash payments to acquire fixed assets (including intangibles). These payments
include those relating to capitalized research & development costs and self-
constructed fixed assets;
Cash receipts from disposal of fixed assets (including intangibles)
Cash payments to acquire shares, warrants, or debt instruments of other
enterprises and interests in joint ventures (other than payments for those
instruments considered to be cash equivalents and those held for dealing or
trading purposes);
Cash receipts and disposal of shares, or debt instruments of other enterprises
and interests in joint ventures (other than receipts for those instruments
considered to be cash equivalents and those held for dealing or trading purposes);
Cash advances and loans made to third parties (other than advances and loans
made by a financial enterprise);
Cash receipts from the repayment of advances and loans made to third parties
(other than advances and loans made by a financial enterprise);
Cash payments for future contracts, forward contracts, opinion contracts, and
swap contracts except when the contracts are held for dealing or trading
purposes, or the payments are classified as financing activities; and
Cash receipts for future contracts, forward contracts, opinion contracts, and swap
contracts except when the contracts are held for dealing or trading purposes, or
the payments are classified as financing activities; and
When a contract is accounted for as a hedge of an identifiable position, the cash
flows of the contracts are classified in the same manner as the cash flows of the position
being hedged.
33
III. CASH FLOWS FROM FINANCING ACTIVITIES:
The separate disclosure of cash flows arising from financing activities is
important because it is useful in predicting claims or future cash flows by providers of
funds (both capital and borrowings) to the enterprise. Examples of cash flows arising
from financing activities are;
Cash proceeds from issuing shares or other similar instruments;
Cash proceeds from issuing debentures, loans, notes, bonds, and other
short-term or long-term borrowings; and
Cash repayments of amounts borrowed;
Cash payments to redeem preference shares
Payment of dividend
PREPERATION OF CASH FLOW ANALYSIS:An organization should prepare a cash flow statement according to accounting
standered-3. The following basic information’s are required for the pr3peration of a cash
flow statement:
1. Comparative balance sheets
2. Profit and loss account
3. Additional data.
This statement is prepared in three stages as given below;
Net profit before taxation and extraordinary items.
Cash flow from operating, investing and financing activities.
Cash flow statement.
Changes in fixed assets and fixed liabilities have not been adjusted as these are
shown separately in the cash flow statement. It is so because current assets and current
liabilities are directly related to operations. Cash paid is deducted from cash generated
from operations in order to get the figure of cash flow before extraordinary items in order
to get the figure of cash provided by or using from operating activities.
34
SPECIAL ITEMS:
In addition to the general classification of three types of cash flows accounting
standard-3 for the treatment of cash flows of certain social item as under;
a. Foreign currency cash flows
b. Extraordinary items
c. Interest and dividends
d. Taxes on income
e. Investments in subsidiaries, associates and joint ventures
f. Acquisitions and disposal of subsidiaries and other business units.
g. Non-cash transactions;
h. The acquisition of assets by assuming directly related liabilities;
i. The acquisition of an enterprise by means of issue of shares; and
j. The conversion of debt to equity.
So cash flow analysis reveals the various items of inflow and outflow of cash. It is
an essential tool for short term financing analysis and is very helpful in the evaluation of
current liability of a business concern. It helps the business executives of a business in the
efficient cash management and internal financial management.
35
Table-1 Sources and applications of cash operating activities during 2006-07
Particulars
31-3-2007
Rs lakhs
31-3-2007
Rs lakhs
A. Cash flow from operating activities:-
Profit/loss before tax
Adjustments for:
Cash outflows:
Depreciation Miscellaneous expenses doubtful debts
Interest expenses and financial charges
(2859.77+102.00+2234.88)
Provision for doubtful debts
Cash inflows:
interest income & Profit on sale of current investments
(13.47+138.15)
Loss on sale of fixed assets
Operating profit before working changes and adjustments
Working capital changes:
-(increase)/decrease in inventories
-(Increase)/decrease in trade and other receivables
-(increase)/Decrease in loans and advances
-(increase)/decrease in trade and other payables
Cash generated before extraordinary items
Extraordinary item: Compensation paid to employees
Under Voluntary retirement scheme & other schemes.
Cash generated from operations
Less:- income tax paid (i.e., tax deducted at source)
Net Cash generated from operating activities (A)
5196.65
(30.94)
(151.62)
29.99
2456.46
5044.88
(611.37)
1554.54
(363.49)654.10
7500.54
1223.78
8734.32
126.35
8607.97
(47.24)
8560.73
36
Table-2
Inflows and outflows of cash during 2006-2007
Particulars
31-3-2007
Rs lakhs
31-3-2007
Rs lakhs
B. cash flow from Investing activities:
Cash inflow: Sale of fixed assets
Sale of current investments
Interest received
Loans repaid by Sri Vishnu cement ltd
Cash outflow: purchase of fixed assets
Purchase of current Investments
Investments in Sri Vishnu Cement ltd
Investments in Sitapuram power ltd
Business advance for power management
Loans to Sri Vishnu cement ltd
Net Cash used in Investing activities (B)
C. Cash flow from Financing Activities:
Cash Inflow:
Borrowings
Sales Tax deferral
Increase in trade deposits from stockiest
and dealers
Cash outflow: repayment of Borrowings
Interest & finance charges paid
Increase/decrease in cash credit and demand
loans
Net Cash generated from Financing activities ©
Net decrease/decrease in cash & cash equivalents
(A+B+C) : (3782.33+7142.17+566.21)
Cash & cash equivalents at the beginning of the
financial year- cash and bank balances
Cash & cash equivalents at the end of the
financial year- cash and bank balances
4.42
6659.81
121.61
525.00
(949.89)
(6646.34)
(13.04)
(725.99)
(800.00)
(2123.00)
3974.42
3684.11
947.66
92.39
(6314.66)
(2104.55)
(798.62)
(4493.67)
92.64
1290.71
1383.3
37
Graph No.1
INTERPRETATION: In this year company earns the cash inflows from the outside of
company. (1290.71-1383.35) = Rs. 92.64. Because opening cash is less than the
closing cash balance. And also all cash outflows are high than the cash inflows of that
activities. Investing outflow is Rs. 3974.42, financing outflow is rs. 4493.67. Because
the cash inflow of operating activities are very high i.e., Rs. 8560.73. And also
payments are high.
This year net cash is high to compare with the previous year i.e.,
Rs.8560.73. this year also compensation is paid to the voluntary retirement
employees. (126.35). operating profit before changes is Rs. 7500.34. Income tax is
also paid.
Table-3
38
Years Particulars Amount 2007 Cash from operating activities 8560.73
Cash from investing activities 3974.42Cash from financing activities (4493.67)
Amount
8560.73
3974.42
-4493.67
2007cash from operating activities2007cash from investing activities2007 cash from financing activities
Sources and applications of cash operating activities during 31-12-2007 (For 9 months)
Particulars
31-12-2007
Rs lakhs
31-12-2007
Rs lakhs
A. Cash flow from operating activities:-
Profit/loss before tax & extraordinary items
Adjustments for:
Cash outflows: Depreciation Miscellaneous expenses doubtful debts
Interest expenses and financial charges
(2200.41+67.10+43.26+990.68)
Cash inflows:
interest income & Profit on sale of current investments
dividend on investments (60.18+1.65+76.00)
Loss on sale of fixed assets
Operating profit before working changes and other
Adjustments
Working capital changes:
-(increase)/decrease in inventories
-(Increase)/decrease in trade and other receivables
-(increase)/Decrease in loans and advances
-(increase)/decrease in trade and other payables
Cash generated before extraordinary items
Extraordinary item: Compensation paid to employees
Under Voluntary retirement scheme & other schemes.
Cash generated from operations
Less:- income taxes
Net Cash generated from operating activities (A)
3301.45
(137.83)
450.41
225.06(965.58)49.261792.15
13444.41
3614.0317058.65
1100.89
18159.74 ----
18159.74
(1074.02)
17085.72
Table-4
39
Inflows and outflows of cash during 31-12-2007 (for 9 months)
Particulars
31-12-2007
Rs lakhs
31-12-2007
Rs lakhs
B. cash flow from Investing activities:
Cash inflow: Sale of fixed assets
Sale of current investments
Interest received
Loans repaid by Sri Vishnu cement ltd
Dividend on investments
Cash outflow: purchase of fixed assets
Purchase of current Investments
Investments in Sri Vishnu Cement ltd
Investments in Sitapuram power ltd
Business advance for power management
Loans to Sri Vishnu cement ltd
Net Cash used in Investing activities (B)
C. Cash flow from Financing Activities:
Cash Inflow:
Borrowings
Sales Tax deferral
Increase in trade deposits from stockiest
and dealers
Cash outflow: repayment of Borrowings
Interest & finance charges paid
Increase/decrease in cash credit and demand
loans
Net Cash generated from Financing activities ©
Net increase/decrease in cash & cash equivalents
(A+B+C) : (17085.72-6936.18-9956.41)
Cash & cash equivalents at the beginning of the
financial year- cash and bank balances
Cash & cash equivalents at the end of the
financial year- cash and bank balances (1383.35+193.13)
3.71
14024.45
61.93
1598.00
1.65
(3917.45)
(17756.65)
(24.82)
(927.00)
--------
-----6936.18
134.11
675.94
(125.74)
(9274.15)
(1037.07)
(329.50)
(9956.41)
193.13
1383.35
1576.48
Years Particulars Amount 2007 (For 9 Months) Cash from operating activities 17085.72
Cash from investing activities 6936.18Cash from financing activities (9956.41)
40
Graph No.2
Interpretation:In this year company earns cash inflows from outside of the company. (1576.48-
1383.35)= Rs 193.13. Because opening cash is less than the closing cash balance.
And also all cash outflows are high than the cash inflows of that activities. Investing
outflow is 6936.18, financing outflow is 9956.41. Because the cash inflow of
operating activities re very high i.e., 17085.72.
This year net cash is high with the previous year i.e., Rs 17085.72. Operating
profit before working capital changes is 17058.85. Income tax also paid (including
fringe benefit.
41
Amount
17085.72
6936.18
-9956.41
2007cash from operating activities2007cash from investing activities2007 cash from financing activities
Table-5 Sources and applications of cash operating activities during 2007-08
Particulars
31-3-2008
Rs lakhs
31-3-2008
Rs lakhs
A. Cash flow from operating activities:-
Profit/loss before tax
Adjustments for:
Cash outflows:
Depreciation amortization of goodwill
Interest and other finance cost
(5204.23+1799.20+950.93)
Cash inflows:
interest income & Profit on sale of current investments
dividend income(1118.67+0.39+194.82)
Loss on sale of fixed assets
Operating profit before working changes and adjustments
Working capital changes:
-(increase)/decrease in inventories
-(Increase)/decrease in sundry debtors
-(increase)/Decrease in loans and advances
Increase in current liabilities and provisions
Cash generated from operations
Less:- income tax paid (i.e., tax deducted at source)
Net Cash provided by operating activities (A)
7954.36
(1313.88)
265.76
28360.18
6906.24
750.95707.52
(1579.30)
984.50
35266.42
863.63
3613.05
(5827.03)
30303.02
42
Table-6
Inflows and outflows of cash during 2007-2008
Particulars
31-3-2008
Rs lakhs
31-3-2008
Rs lakhs
B. cash flow from Investing activities:
Cash inflow: Sale of fixed assets
Sale of current investments
Interest received
Dividend received
Cash outflow: purchase of fixed assets
Purchase of current Investments
Purchase of shares in SVCl
Net Cash used in Investing activities (B)
C. Cash flow from Financing Activities:
Cash Inflow:
Proceeds from borrowings
Cash outflow: repayment of Borrowings
Interest & finance charges paid
Net Cash generated from Financing activities ( C )
Net decrease/decrease in cash & cash equivalents
(A+B+C) : (30303.02-16999.13-3472.62)
Cash & cash equivalents at the beginning of the year
Cash & cash equivalents acquire on amalgamation
(refer to note 1 on schedule 19)
Cash & cash equivalents at the end of the
year(30303.02-16999.13-3472.62)
Net increase in cash & cash equivalents
453.53
4003.02
826.64
0.39
(17314.80)
(4950.96)
(16.95)
3974.42
2551.31
(5071.07)
(952.86)
(3472.62)
9831.27
1576.78
604.41
12012.16
9831.27
43
Graph No.3
INTERPRETATION: In this year company earns the cash inflows from the outside of
company. Because opening cash is less than the closing cash balance. And also all
cash outflows are high than the cash inflows of that activities. Investing outflow is
Rs. 3974.42, financing outflow is rs. 4493.67. Because the cash inflow of operating
activities are very high i.e., Rs. 8560.73. And also payments are high.
This year net cash is high to compare with the previous year i.e.,
Rs.8560.73. this year also compensation is paid to the voluntary retirement
employees. (126.35). operating profit before changes is Rs. 7500.34. Income tax is
also paid.
Table-7
44
Years Particulars Amount 2008 Cash from operating activities 8560.73
Cash from investing activities 3974.42Cash from financing activities (4493.67)
Amount
8560.73
3974.42
-4493.67
2008cash from operating activities2008cash from investing activities2008 cash from financing activities
Sources and applications of cash operating activities during 2008-09
Particulars
31-3-2009
Rs lakhs
31-3-2009
Rs lakhs
A. Cash flow from operating activities:-
Profit/loss before tax
Adjustments for:
Cash outflows:
Depreciation amortization of goodwill
Interest and other finance cost
(5377.68+1799.20+534.19)
Cash inflows:
interest income & Profit on sale of current investments
dividend income(745.19+8.39+475.92)
Loss on sale of fixed assets
Operating profit before working changes and adjustments
Working capital changes:
increase in inventories
-(Increase)/decrease in sundry debtors
-(increase)/Decrease in loans and advances
Increase in current liabilities and provisions
Cash generated from operations
Less:- income tax paid (i.e., tax deducted at source)
Net Cash provided by operating activities (A)
7711.07
(1229.5)
535.38
32194.00
7016.95
(2216.97)
(109.09)
(2942.11)
10079.44
39210.95
4811.2744022.22
(11364.05)
32524.25
Table-8
45
Inflows and outflows of cash during 2008-2009
Particulars
31-3-2009
Rs lakhs
31-3-2009
Rs lakhs
B. cash flow from Investing activities:
Cash inflow: Sale of fixed assets
Sale of current investments
Interest received
Dividend received
Cash outflow: purchase of fixed assets
Purchase of current Investments
Net Cash used in Investing activities (B)
C. Cash flow from Financing Activities:
Cash Inflow:
Proceeds from borrowings
Cash outflow: repayment of Borrowings
Interest & finance charges paid
Repayment of non convertible borrowings
Net Cash generated from Financing activities ©
Net decrease/decrease in cash & cash equivalents
(A+B-C) : (32524.25-47722.06+7959.12)
Cash & cash equivalents at the beginning of the year
Cash & cash equivalents at the end of the
year(30303.02-16999.13-3472.62)
Net increase in cash & cash equivalents
13.91
43360.55
1009.81
8.39
(54181.05)
(37933.67)
3974.42
10915.03
(1575.00)
(534.19)
(846.72)
7959.12
7238.69
12012.16
4773.47
7238.69
46
Graph No.
4
INTERPRETATION: In this year company earns the cash inflows from the outside of
company. Because opening cash is less than the closing cash balance. And also all
cash outflows are high than the cash inflows of that activities. Investing outflow is
Rs. 47722.06, financing outflow is rs.7959.12. Because the cash inflow of operating
activities are very high i.e., Rs.32524.25 And also payments are high.
This year net cash is high to compare with the previous year i.e.,
Rs.32524.25. this year also compensation is paid to the voluntary retirement
employees. (126.35). operating profit before changes is Rs. 7500.34. Income tax is
also paid.
Table-9 Sources and applications of cash operating activities during 2009-10
31-3-2010 31-3-2010
47
Years Particulars Amount 2009 Cash from operating activities 32524.25
Cash from investing activities (47722.06)Cash from financing activities 7959.12
Amount
32524.25
-47722.06
7959.12
2009cash from operating activities2009cash from investing activities2009 cash from financing activities
Particulars Rs lakhs Rs lakhs
A. Cash flow from operating activities:-
Profit/loss before tax
Adjustments for:
Cash outflows:
Depreciation amortization of goodwill
Interest and other finance cost
(5488.32+1799.20+424.13)
Cash inflows:
interest income and dividend income
(141.42+116.50)
Loss on sale of fixed assets
Operating profit before working changes and adjustments
Working capital changes:
Decrease/(increase) in inventories
Increase in sundry debtors
Decrease/(increase) in loans and advances
(Decrease)/Increase in current liabilities and provisions
Cash generated from operations
Less:- income tax paid (i.e., tax deducted at source)
Net Cash provided by operating activities (A)
7711.65
(257.92)
18.59
27719.24
7472.32
1606.03
(1244.40)
3610.70
(2283.25)
35191.56
1689.0836880.64
(9922.23)
26846.96
Table-10
Inflows and outflows of cash during 2009-201031-3-2010 31-3-2010
48
Particulars Rs lakhs Rs lakhs
B. cash flow from Investing activities:
Cash inflow: Sale of fixed assets
Sale of current investments
Interest received
Dividend received
Cash outflow: purchase of fixed assets
Purchase of current Investments
Net Cash used in Investing activities (B)
C. Cash flow from Financing Activities:
Cash Inflow:
Proceeds from borrowings
Cash outflow: repayment of Borrowings
Interest & finance charges paid
Net Cash generated from Financing activities ©
Net decrease/decrease in cash & cash equivalents
(A+B-C) : (26846.96+(39885.66)+29347.12)
Cash & cash equivalents at the beginning of the year
Cash & cash equivalents at the end of the
year(30303.02-16999.13-3472.62)
Net increase in cash & cash equivalents
20.02
92143.32
1128.28
182.94
(29552.81)
(103807.41)
(39885.66)
36645.37
(2151.36)
(5146.89)
29347.12
16308.42
4773.47
21081.89
16308.42
49
T
Graph
No.5
INTERPRETATION: In this year company earns the cash inflows from the outside of company.
(1290.71-1383.35) = Rs. 92.64. Because opening cash is less than the closing cash
balance. And also all cash outflows are high than the cash inflows of that activities.
Investing outflow is Rs. 39885.66financing outflow is rs.29347.12. Because the cash
inflow of operating activities are very high i.e., Rs.26846.96. And also payments are
high.
This year net cash is high to compare with the previous year i.e.,
Rs.26846.96. this year also compensation is paid to the voluntary retirement
employees. (126.35). operating profit before changes is Rs. 7500.34. Income tax is
also paid.
Overall cash flow analysis of company from 2009 -2010:
Operating activities cash, investing activities cash are slowly decreasing
from 2007-2010. In 2007 2008 year these are increased. In 2006, 2007 years
company earns cash inflows from outside of company. It is very less to compare
without flows. The overall net cash is fluctuating.
50
Years Particulars Amount 2010 Cash from operating activities 26846.96
Cash from investing activities (39885.66)Cash from financing activities 29347.12
Amount
26846.96
-39885.66
29347.12
2010cash from operating activities2010cash from investing activities2010 cash from financing activities
Table - 11 Sources and applications of cash operating activities during 2010-11
Particulars
31-3-2011
Rs lakhs
31-3-2011
Rs lakhs
A. Cash flow from operating activities:-
Profit/loss before tax
Adjustments for:
Cash outflows:
Depreciation amortization of goodwill
Interest and other finance cost
(5688.32+2099.20+500.13)
Cash inflows:
interest income and dividend income
(141.42+158.58)
Loss on sale of fixed assets
Operating profit before working changes and adjustments
Working capital changes:
Decrease/(increase) in inventories
Increase in sundry debtors
Decrease/(increase) in loans and advances
(Decrease)/Increase in current liabilities and provisions
Cash generated from operations
Less:- income tax paid (i.e., tax deducted at source)
Net Cash provided by operating activities (A)
8287.65
(300.00)
20.59
30719.24
8608.24
1706.03
(1444.40)
3810.70
(2483.25)
39327.48
1589.0840916.56
(7922.23)
32994.33
51
Table-12
Inflows and outflows of cash during 2010-11
Particulars
31-2-2011
Rs lakhs
31-3-2011
Rs lakhs
B. cash flow from Investing activities:
Cash inflow: Sale of fixed assets
Sale of current investments
Interest received
Dividend received
Cash outflow: purchase of fixed assets
Purchase of current Investments
Net Cash used in Investing activities (B)
C. Cash flow from Financing Activities:
Cash Inflow:
Proceeds from borrowings
Cash outflow: repayment of Borrowings
Interest & finance charges paid
Net Cash generated from Financing activities ©
Net decrease/decrease in cash & cash equivalents
(A+B-C) : (32994.33+49174.48)-30237.12)
Cash & cash equivalents at the beginning of the year
Cash & cash equivalents at the end of the
year(32524.25-47722.06-795912)
Net increase in cash & cash equivalents
21.02
93143.32
1228.28
192.94
(29952.81)
(113807.41)
(49174.48)
37645.37
(2171.36)
(5236.89)
30237.12
2757.21
4273.47
22081.89
2757.21
52
Graph
No.5
INTERPRETATION: In this year company earns the cash inflows from the outside of
company. (604.41-4773.47) = Rs. 9831.27. Because opening cash is less than the
closing cash balance. And also all cash outflows are high than the cash inflows of that
activities. Investing outflow is Rs. 49174.48 financing outflow is rs.30237.12.
Because the cash inflow of operating activities are very high i.e., Rs.32994.33. And
also payments are high.
53
Years Particulars Amount 2011 Cash from operating activities 32994.33
Cash from investing activities (49174.48)Cash from financing activities 30237.12
This year net cash is high to compare with the previous year i.e.,
Rs.26846.96. this year also compensation is paid to the voluntary retirement
employees. (126.35). operating profit before changes is Rs. 7500.34. Income tax is
also paid.
Overall cash flow analysis of company from 2010 -2011:
Operating activities cash, investing activities cash are slowly decreasing
from 2008-2011. In 2008 2009 year these are increased. In 2007, 2008 years
company earns cash inflows from outside of company. It is very less to compare
without flows. The overall net cash is fluctuating.
Table-13Overall sources of cash flow analysis
Cash sources 31-3-2006 31-3-2007 31-12-2007 31-12-2008 31-12-2009 31-3-2010 31-03-2011
Operating
Activities(a) 3416.09
8560.733 17085.72 30303.02 32524.25 26846.96 32994.33
Investing
activities(b) (282.28) (3974.42) (6936.18) 16999.13 (47722.06) (39885.66) 49174.48
Financing
Activities (C) (3559.50) (4493.67) (9956.41) 3742.62 7959.12 29347.12 30237.12
Total net
Cash (a+b+c) (425.69) 92.64 193.13 9831.27 7238.69 16308.12 112405.93
54
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2006
Rs in lakhsParticulars 31-03-2006 31-03-2005
Income Sales (Gross) 39,889.97 35,851.44Less : Excise Duty 7,284.81 6,830.29Sales (Net) 32,605.16 29,021.15Other Income 419.40 236.60
33,024.56 29,257.75
Expenditure Purchase of finished goods for resale 1,574.29 155.08Manufacturing and other expenses 28,082.30 25,591.08Depreciation 2,839.05 2,839.05Interest and other finance charges 2,333.38 2,949.46Decrease in stocks of work-in-process and finished goods 92.77 459.71
34,921.99 32,005.66Loss before extraordinary item 1,897.43 2,747.91Extraordinary Item – Compensation paid to employees under Voluntary Retirement and Others Scheme 207.49Loss for the year 2,104.92 2,747.91
Debit balance brought forward from previous year 14,504.26 11,756.35Debit balance carried to balance sheet 16,609.18 14,504.26
55
BALANCE SHEET AS ON 31 st MARCH, 2006
Particulars 31-03-2006 31-03-20051. Sources of Funds :Share Capital 42,796.14 42,796.14Reserve & Surplus 21,901.93 21,901.93
64,698.07 64,698.07Loans Funds :Secured Loans / Funds 17,431.03 19,018.51Unsecured Funds 9,767.41 9,070.51
27,198.44 28,089.02Total 91,896.51 92,787.09
2. Application of Funds: Fixed AssetsGross Block 53,550.07 53,331.94(-) Dep. 19,787.74 16,982.13Net Block 33,762.33 36,349.61Capital work in progress 140.42 128.23
33,902.75 36,477.84Investments 36,557.57 36,525.14Current assets, loans & advances : Inventories 2,503.20 2,281.92Sundry Debtors 2,467.39 3,109.72Cash & Bank Balances 1,290.71 1,716.40Loans & Advances 1,906.20 1,771.46
8,167.50 8,879.50Current Liabilities & Provisions :Current Liabilities 3,381.69 3,827.41Provisions 127.90 50.43
3,509.59 3,877.84Net Current Assets 4,657.91 5,001.66Miscellaneous Expenditure 169.10 278.19Profit and Loss Account 16,609.18 14,504.26
Total 91,896.51 92,787.09
56
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2007
Rs in lakhs Particulars 31-03-2007 31-03-2006
Income
Sales (Gross) 47,306.18 40,166.84
Less : Excise Duty 7,616.56 7,284.19
Sales (Net) 39,689.62 32,882.65
Other Income 457.41 412.55
40,147.03 33,295.20
Expenditure
Purchase of finished goods for resale 3,288.27 1,574.49
Manufacturing and other expenses 29,552.25 28,359.17
Depreciation 2,859.77 2,839.05
Interest and other finance charges 2,234.88 2,333.38(Increase)/Decrease in stocks of work-in-process and finished goods (244.60) 86.54
37,690.57 35,192.63
Profit / (Loss) for the year 2,456.46 (1,897.43)
Provision for Tax
Current Tax -- --
Fringe Benefit Tax 65.00 --
Profit / (Loss) for the year 2,265.11 (2,104.92)
Debit balance brought forward from previous year (16,609.18) (14,504.26)
Debit balance carried to balance sheet 14,344.07 16,609.18
57
BALANCE SHEET AS ON 31 ST MARCH,2007 Rs in lakhs
Particulars 31-03-2007 31-03-20061. Sources of Funds :Share Capital 42,796.14 42,796.14Reserve & Surplus 21,901.93 21,901.93
64,698.07 64,698.07Loans Funds :Secured Loans / Funds 1,533.07 17,431.03Unsecured Funds 9,868.55 9,767.41
25,198.68 27,198.44Total 89,896.69 91,896.51
2. Application of Funds :Fixed AssetsGross Block 54,205.96 53,550.07(-) Dep. 22,537.12 19,787.74Net Block 31,668.84 33,762.33Capital work in progress 289.62 140.42
31,958.46 33,902.75Investments 36,723.60 36,557.57Current assets, loans & advances : Inventories 3,114.57 2,503.20Sundry Debtors 934.79 2,467.39Cash & Bank Balances 1,383.35 1,290.71Loans & Advances 5,284.23 1,906.20
10,725.94 8,167.50Current Liabilities & Provisions :Current Liabilities 3,758.62 3,38169Provisions 289.62 127.90
3,922.48 3,509.59Net Current Assets 6,803.46 4,657.91Miscellaneous Expenditure 67.10 169.10Profit and Loss Account 14,344.07 16,609.18
Total 89,896.69 91,896.51
58
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2008
Rs. in lakhs
Particulars 31-12-2008(Amalgamated) 31-12-2007
Income
Sale of manufactured goods 1,16,900.24 47,905.48
Less : Excise Duty 17,521.32 6,388.76
99,378.92 41,516.72
Sale of traded goods - 2,404.44
Other Income 1,832.29 432.61
1,01,211.21 44,353.77
Expenditure
Cost of goods sold 36,172.58 16,825.32
Personnel cost 3,604.81 1,777.200
Other expenses 25,119.28 9,234.53
Depreciation 5,204.23 2,200.41
Amortisation of goodwill 1,7,99.20 --
Interest and other finance cost 950.93 871.49
72,851.03 30,908.95
Profit before tax 28,360.18 13,444.82
Provision for tax 6,542.84 982.00
- Current tax (982.00) -
- MAT credit of earlier years (713.59) -
- fringe benefit tax 115.83 28.00
- deferred tax charge 5,339.36 -
Profit for the year 18,057.74 12,434.82Debit balance in Profit and Loss account brought forward (1,909.25) (14,344.07)Balance in Profit & Loss account carried forward 16,148.49 (1,909.25)
59
BALANCE SHEET AS ON 31 st MARCH 2008
Particulars 31-12-2008(Amalgamated 31-12-2007
1. Sources of Funds :Share Capital 42,796.14 42,796.14Reserve & Surplus 38,050.42 21,901.93
80846.56 64,698.07Loans Funds :Secured Loans / Funds 4,168.45 6,760.49Unsecured Funds 12,286.48 8,943.65
Deferred tax liability 5,659.63 ---------22,114.29 15,704.14
Total 1,02,960.85 80402.212. Application of Funds :Fixed AssetsGross Block 89,683.71 53,811.03(-) Dep. 29,850,93 24,043.25
Net Block 59,832.78 29,767.78Capital work in progress 320,247.06 3,453.60
80,079.84 33,221.38Investments 10,051.06 42,083.62Current assets, loans & advances : Inventories 3971.01 2889.51Sundry Debtors 2531.00 1866.11Cash & Bank Balances 12012.16 1576.48Loans & Advances 8821.93 3442.81
27336.1 9774.91Current Liabilities & Provisions :Current Liabilities 131132.52 6020.09Provisions 1373.63 566.86
14506.18 6586.95Net Current Assets 12,829.95 3,187.96Profit and Loss Account ----------- 1,909.25
Total 1,02,960.85 80402.21
60
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2009
Particulars 31-12-2009 31-12-2008
Income
Sale of manufactured goods 137,728.95 1,16,900.24
Less : Excise Duty 20,207.11 17,521.32
117,521.84 99,378.92
Sale of traded goods -
Other Income 1,807.18 1,832.29
1,19,329.02 1,01,211.21
Expenditure
Cost of goods sold 46,374.89 36,172.58
Personnel cost 4,030.09 3,604.81
Other expenses 29,017.00 25,119.28
Depreciation 5,377.68 5,204.23
Amortization of goodwill 1,7,99.20 1,799.20
Interest and other finance cost 534.19 950.93
87,133.05 72,851.03
Profit before tax 32,195.97 28,360.18
Provision for tax 12,881.45 6,542.84
- Current tax - (982.00)
- MAT credit of earlier years - (713.59)
- fringe benefit tax 60.00 115.83
- deferred tax charge 518.20 5,339.36
Profit for the year 19,772.72 18,057.74Debit balance in Profit and Loss account brought forward (16,148.49) (1,909.25) Balance in Profit & Loss account carried forward (35,921.21) (16,148.49)
61
BALANCE SHEET AS ON 31 st MARCH 2009 Rs. in lakhs
Particulars 31-12-2009 31-12-20081. Sources of Funds :Share Capital 42,796.14 42,796.14Reserve & Surplus 57,823.14 38,050.42
100,619.28 80846.56Loans Funds :Secured Loans / Funds 10,342.31 4,168.45Unsecured Funds 14,605.93 12,286.48Deferred tax liability 5,141.16 5,659.63
15,704.14 22,114.29Total 1,30,708.68 1,02,960.85
2. Application of Funds :Fixed AssetsGross Block 91,539.87 89,683.71(-) Dep. 36,353.10 29,850,93Net Block 55,186.77 59,832.78Capital work in progress 71,347.95 320,247.06
126,534.72 80,079.84Investments 5,100.00 10,051.06Current assets, loans & advances : Inventories 6,071.35 3971.01Sundry Debtors 2,640.09 2531.00Cash & Bank Balances 4,773.47 12012.16Loans & Advances 10,803.09 8821.93
24,288.00 27336.1Current Liabilities & Provisions :Current Liabilities 22,479.86 13132.52Provisions 2,734.18 1373.63
25,214.04 14506.18Net Current Assets 926.04 12,829.95Profit and Loss Account ----------- ----------
Total 1,30,708.68 1,02,960.85
62
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2010
Rs. in lacs
Particulars 31-12-2010 31-12-2009
Income
Sale of manufactured goods 1,20,946.74 137,728.95
Less : Excise Duty 12,218.19 20,207.11
1,08,728.55 117,521.84
Sale of traded goods -
Other Income 796.30 1,807.18
1,09,524.85 1,19,329.02
Expenditure
Cost of goods sold 40,613.42 46,374.89
Personnel cost 4,427.88 4,030.09
Other expenses 29,052.66 29,017.00
Depreciation 5,488.32 5,377.68
Amortization of goodwill 1,799.20 1,799.20
Interest and other finance cost 424.13 534.19
81,805.61 87,135.02
Profit before tax 27,719.24 32,195.97
Provision for tax 11,520.00 12,879.48
- Current tax - -
- MAT credit of earlier years - -
- fringe benefit tax 16.45 60.00
- deferred tax charge (781.16) 518.20
Profit for the year 16,963.95 19,772.72Debit balance in Profit and Loss account brought forward 35,921.21 (16,148.49)Balance in Profit & Loss account carried forward 52,885.16 (35,921.21)
63
BALANCE SHEET AS ON 31 st MARCH 2010
Rs. in lakhsParticulars 31-12-2010 31-12-2009
1. Sources of Funds :Share Capital 42,796.14 42,796.14Reserve & Surplus 74,787.09 57,823.14
117,619.28 100,619.28Loans Funds :Secured Loans / Funds 43,190.95 10,342.31Unsecured Funds 16,251.30 14,605.93Deferred tax liability 4,360.00 5,141.16
Total 181,385.48 1,30,708.682. Application of Funds :Fixed AssetsGross Block 94,463.86 91,539.87(-) Dep. 43,632.78 36,353.10Net Block 50,831.08 55,186.77Capital work in progress 101,290.66 71,347.95
152,121.74 126,534.72Investments 16,764.09 5,100.00Current assets, loans & advances : Inventories 4,378.43 6,071.35Sundry Debtors 3,922.79 2,640.09Cash & Bank Balances 21,081.89 4,773.47Loans & Advances 7,482.89 10,803.09
36,866.00 24,288.00Current Liabilities & Provisions :Current Liabilities 19,445.18 22,479.86Provisions 4,921.17 2,734.18
24,366.35 25,214.04Net Current Assets 12,499.65 926.04
Total 181,385.48 1,30,708.68
64
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2011
Rs. in lacs
Particulars 31-12-2011 31-12-2010
Income
Sale of manufactured goods 1,40,946.74 1,20,946.74
Less : Excise Duty 15,218.19 12,218.19
156164.93 1,08,728.55
Sale of traded goods - -
Other Income 796.30 796.30
156961.23 1,09,524.85
Expenditure
Cost of goods sold 43,613.42 40,613.42
Personnel cost 4,727.88 4,427.88
Other expenses 32,052.66 29,052.66
Depreciation 5,688.32 5,488.32
Amortization of goodwill 2,099.20 1,799.20
Interest and other finance cost 500.13 424.13
88681.61 81,805.61
Profit before tax 30,719.24 27,719.24
Provision for tax 15,520.00 11,520.00
- Current tax - -
- MAT credit of earlier years - -
- fringe benefit tax 20.45 16.45
- deferred tax charge (781.16) (781.16)
Profit for the year 18963.95 16,963.95Debit balance in Profit and Loss account brought forward 37,921.21 35,921.21Balance in Profit & Loss account carried forward 56885.16 52,885.16
65
BALANCE SHEET AS ON 31 st MARCH 2011
Rs. in lakhsParticulars 31-12-2011 31-12-2010
1. Sources of Funds :Share Capital 45,796.14 42,796.14Reserve & Surplus 77,787.09 74,787.09
123583.23 117,619.28Loans Funds :Secured Loans / Funds 45,190.95 43,190.95Unsecured Funds 18,251.30 16,251.30Deferred tax liability 63442.25 4,360.00
Total 187025.48 181,385.482. Application of Funds :Fixed AssetsGross Block 97,463.86 94,463.86(-) Dep. 43,632.78 43,632.78Net Block 53,831.08 50,831.08Capital work in progress 105,290.66 101,290.66
159121.74 152,121.74Investments 19,764.09 16,764.09Current assets, loans & advances : Inventories 4,678.43 4,378.43Sundry Debtors 4,222.79 3,922.79Cash & Bank Balances 25,081.89 21,081.89Loans & Advances 8,082.89 7,482.89
42066.00 36,866.00Current Liabilities & Provisions :CurCCrent Liabilities 22,445.18 19,445.18Provisions 5,221.17 4,921.17
27666.35 24,366.35Net Current Assets 16,499.65 12,499.65
Total 187025.48 181,385.48
66
FINDINGS:
1. During 2005-2006 year, cash outflows are higher than the cash inflows i.e.,
[(11144.9)-10719.21]=(425.69). Because purchase of fixed assets, interest and
payments of borrowing interest are more than the sales of fixed assets, investment.
The operating income is Rs 3416.09.
2. In 2006-2007 year, cash inflows are more than the outflows of cash. Because
borrowings, sales of fixed assets, investments are more than the purchase and
payment of amount [(20503.09)-20595.73] =92.64. Operating income is Rs
8560.73.
3. In 2007 the period of 9 months, cash outflows are higher than cash inflows.
[(17085.72)-16892.59]=193.13. Because Purchase of fixed assets, investments are
more than the sales of fixed assets. Investments. The operating income is
17085.72.
4. In 2007-2008 year, also cash outflows are higher than cash inflows. [30303.02-
20471.75]=9831.27. Because Purchase of fixed assets, investments are more than
the sales of fixed assets. Investments. The operating income is 30303.02.
5. In 2008-2009 year the operating income is Rs 32524.25.
6. In 2009-2010 year the Operating income is Rs 26,846.96.
7. Company putting investments in Sri Vishnu cement Ltd every year.
8. In 2009-2010 year, cash inflows amount is very less to compare with the
2007year.
9. Cash from operating activities are increasing from 2007-2009.In 2008 year it was
increased to Rs 30303.02.
10. In 2010-2011 year the Operating income is Rs 32994.33.
67
SUGGESTIONS
Suggested that the company should try to reduce the purchases of fixed assets, current
investments and investments in Sri Vishnu Cement Ltd.
Suggested that reduce the borrowings from outside of the company. It will show effects
on the time of payment of interest.
Suggested that to increase the trade deposits from stockiest and dealers.
Suggest that and also should increase in cash credit and demand loans.
To reduce the purchases and utilize this amount in the place of receiving
Borrowings.
Suggested that to reduce the provision for doubtful debts and miscellaneous expenses.
68
CONCLUSION
The following conclusions are arrived at based on the observations made on the
present study:-
Except of the first year (2007-08) the study period it is observed that the fund
for operation is on loss. It generated the funds in application of total funds. Except
of the first year of the study of period, funds were utilized for financing the
working capital need. The study revealed a mixed trend of application and sources
of funds in respect of Secured and unsecured loans.
Financial; statements are the sources of information on the basis of which conclusions are
drawn about the profitability and financial position of a concern. The primary objective
of the financial statement is to assist in decision making to those who are interested in the
financial affairs of the business enterprise. The Accounting Principles Board of America
(APB) state that following objectives of financial statements.
To provide reliable financial information about economic resource and obligation
of a business firm i.e., cash inflows and cash outflows.
To provide other needed information about changes in such economic resource
and obligations.
To provide a financial information the assist in estimating the earning of
potentials of the business.
To provide information about the working capital and other funds flow.
To disclose, to the extent possible, other information related to the financial
statements that is relevant to its users.
69
BIBLIOGRAPHY
FINANCIAL MANAGEMENT - I.M.PANDEY
FINANCIAL MANAGEMENT - PRASANNA CHANDRA
FINANCIAL MANAGEMENT - KHAN & JAIN
ADVANCED MANAGEMENT - R.K SHARMA
www.ZuariCementLimited.com
www.google.com
70
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