A
A
Project Report
On
Cash Flow Statement
At
Prepared by:
Visavadiya Praful P.
S.Y. M.B.A.
Enroll No. 107190592057
SUBMITTED TO
Indu Management Institute
Affiliated To
Gujarat Technological University
PREFACE
With respect to the requirement of the course prescribed by
Gujarat technological university, I have finished the assignment to
undertake the practical study by medium of small scale industries.
It is true that any student would be aware of the industries aspect
from theoretical point of view, but this theoretical knowledge is
proved by true only when he/she enters in the practical field of
industries.
My industrial training report suggests what I have actually
learnt during my training period. I feel very happy in submitting
this report because it is prepared for the purpose of the study and
for getting more practical knowledge.
ACKNOWLEDGEMENT
I would like to thank our faculties Harshita Samrani and also
Divyesh Patel for their support and guidance which equipped me in
successfully completing my summer training.
I am heart fully grateful to the owners of the Shashi Industries
it's authority and staff for their kind permission to undergo this
training.
I would like to take this opportunity to express my gratitude
towards the Shashi Industries for having allowed me to take
training for 21 days.
The project would not have been possible without the experience,
guidance and supervision of Shashibhai Vadher who has potentially
and critically gone through the subject manner.
Finally, I would like to thank to all those persons who have
directly or indirectly contributed to my project work.
Date:
Praful P. Visavadiya
M.B.A.
Indu Management Institute
Vadodara
INDEX
Sr. No.
particulars
Page no.
1
Introduction
2
Company profile
3
Departments
4
Literature Review
5
Research Methodology
6
Theoretical Framework
7
Cash Flow Analysis
8
Findings
9
Recommendation
10
Conclusion
11
Overa Bibliography
12
Appendix
INTRODUCTION
In financial accounting, a cash flow statement or statement of
cash flows is a financial statement that shows a company's incoming
and outgoing cash during a time period. All three statements are
arranged from the same accounting information, but each statement
serves its individual function. The statement of cash flow reports
the movement of cash into and out of your business in a given year.
Cash is the lifeblood of your company. The cash flow statement
reports your business' sources and uses of cash and the beginning
and ending values for cash and cash equivalents each year. It also
includes the combined total change in cash and cash equivalents
from all sources and uses of cash.
Cash flow statements format planning involves forecasting and
tabulating all significant cash inflows and analyzing the timing of
expected payments in detail. We have highly skilled cash flow
financing professionals prepare comprehensive periodic cash flow
projections that can assist you in tasks such as budgeting,
business planning and fund raising.
1 What Does Cash Flow Mean?
1. A revenue or expense stream that changes a cash
account over a given period. Cash inflows usually arise
from one of three activities - financing, operations or investing -
although this also occurs as a result of donations or gifts in the
case of personal finance. Cash outflows result from expenses
or investments. This holds true for both business and personal
finance.
2. An accounting statement called the "statement of cash
flows", which shows the amount of cash generated and used
by a company in a given period. It is calculated by adding
noncash charges (such as depreciation) to net income after taxes.
Cash flow can be attributed to a specific project, or to a business
as a whole. Cash flow can be used as an indication of a company's
financial strength.
Cash flow Plan is a range of powerful, easy-to-use software
packages for preparing comprehensive monthly cash flow projections
for 12 months ahead. You can use it for cash flow planning,
budgets, business planning, fund raising etc. for young &
established businesses of all sizes and types. It incorporates a
roll-forward facility to help you to speedily update the
projections every month. More powerful versions also include a tool
for consolidating projections.
Cashflow Plan will help plan your business's cash requirements,
improve control over cashflows and conserve cash resources. It will
be especially useful if you need to forecast cashflows in the
context of:
· 1 tight cash/profit margins
· 2 limited financial resources
· 3 planning for growth or radical change
· 4 compiling cash budgets
· 5 preparing business improvement plans.
2. When to Use Cashflow Plan
Cashflow Plan is a software tool for preparing cashflow
projections for a business. It will be especially useful to your
business if you need to improve its future net cashflow. Cashflow
Plan will help you to plan cash requirements and thereby improve
control over your business's cashflows and to conserve its cash
resources
In addition to compiling detailed monthly cash flow forecasts,
Cash flow Plan automatically generates fully-integrated income
statements (profit and loss accounts) and balance sheets on a
monthly basis. This makes Cash flow Plan very suitable for many
other purposes where you may need 12-month projections:
· 1 preparing shorter term business plans,
· 2 exploring development options,
· 3 constructing budgets,
· 4 assessing strategies,
· 5 raising external finance and so on ........
THE CASH FLOW STATEMENT
The cash flow statement & analysis have become so important
that more extends coverage is required. In essence cash flow
statement is fund statement prepared on the basis of fund defined
in term of cash equivalent. The cash flow analysis have however
been extended to certain uses that are more or less foreign to
prior fund statement usage. Usually cash flow statement is prepared
in “T” format. Cash flow statement summaries sources of cash in
flow & uses of cash out flow of the firm during a particular
period of Time. The projected cash flow statement is prepare month
wise, so that it can be useful in presenting information of excess
cash in some month & shorted of cash in others. By making
available such information in advance, the cash flow statement
unable the management to revise the it plans, in the month when
cash receipts are expected to be greater than such payment. Bank
overdraft can be repay, short term government security can be
purchased, and cash discount can be availed & so on. Like wise,
in the month when cash payment are expected to exceed receipt, the
firm would be required to arrange for bank overdraft or sale it
marketable security.
The cash flow statement includes some important terms, which are
as under ;
· “CASH” means cash balance on had & deposited with
bank.
· “CASH” equivalent are short-term and mostly liquid investment
that are readily convertible in to known amount of cash and which
are subject to less risk of changes in value.
· “CASH FLOW” consist cash in flow & cash out flow of cash
& cash equivalent.
· The statement should include operating, investment &
financial activity of firm.
COMPANY PROFILE
I have take training in the SHASHI INDUSTRIES at BHAVNAGAR with
intention to obtain a practical training as a part of my syllabus.
SHASHI INDUSTRIES is very well known for its production of quality
agarbattis.
Shashi industries have their 5 branches at bhavnagar and rests
are at banglore.
SHASHI INDUSTRY
Opp. Darbari kothar
Selarsha road
Bhavnagar-364001
MAJA FREGRENCE
Bhavnagar.
SHASHI INDUSTRY
Banglore.
SHASHI INCENSE
Banglore.
Shashi industry is very famous in India and abroad too for its
production of best quality agarbattis. The products are known by
its brand name like Maza, Denim, Ruturaj, Pavitra, Chandan, Camay,
Yes, Gulal, Rose, Tall, Mogra, etc.
Shashi industry was established in 1960. Mr. Shashibhai is the
founder of the firm. the firm was sole proprietorship till 1994.
Then after it has been converted into partnership. Mr.shashibhai
vadher and his son Mr. Tusharbhai are the partners.
It also produces an electric stabilizers under the name of “TINA
ELECTRONICS PVT. LTD.”with the brand name of “Miracle” in banglore.
It is producing for the first time in India with German
technologies and It has receive favourable reply of people.
Brief information about the company
Name of the company : shashi industry
Registered office : opp. Darbari kothar
Selarsha road,
Bhavnagar 364001
Phone (0278) 2430539
Fax : (0278) 2436743
Year of incorporation : 1960
Chairman
: Mr. shashibhai R. Vadher
Managing director : Mr. tushar bhai S. Vadher
Corporate office : SHASHI INDUSTRY
1046,4th M’Block
80 Feet Road,
Rajai Nagar,
Banglore – 560010
TINA ELECTRONICS PVT.LTD
1st Floor, Kamakshipalya,
Ind. Estate,
Megadi Road,
Banglore -560079
Factories : SHASHI INDUSTRY
Plot No. 89 GIDC Chitra,
Bhavnagar.
MAZA FRAGRANCE PVT. LTD.
Plot No.36, GIDC Vartej,
Bhavnagar.
Auditors
: M/S J.C.Rampura & Company,
Rajkot.
Bankers : State Bank Of India
Product : Incense Sticks
Accounting Year
: 1st April to 31st March
Production
: Manual
Total Worker : 81
Age Of Retirement
: Not Fixed
Competitors
: Cycle Brand Agarbattis
Banglore
Production Capacity
: 20000 dozen packet per year
E-mail Address
: [email protected]
Website
:www.incensestickindia.com
History and development of the company
The SHASHI INDUSTRY was actually found by Mr. Shashibhai Vadher
and established in 1960. at the time they were producing the “pan
masala & kimam”
After a long period of time, in the year 1975 Mr. Shashibhai
moved towards producing quality agarbattis. When they selected this
business, they observed that 95% of incense sticks was covered by
Bangalore, So Mr. shashibhai decided to start incense stick
business with modern attitude and introduced fancy fragrance of
incense and also strategic tricks of marketing. First they started
unit at BHAVNAGAR in GUJARAT under the name of SHASHI INDUSTRY.
Later on in 1994-95, the soleproperietorship firm converted into
partnership firm. Mr. Tusharbhai Vadher , son of Mr. Shahshibhai
Vadher Joins the industry In 1994.
SHASHI INDUSTRY starts its 2nd unit at Bangalore in 1899 because
of 2 reasons i.e.
1) The raw material are easily available
2) Easy to export from Bangalore.
About the Product
SHASHI INDUSTRY introduced its 1st product of incense stick
named “AVON AGRBATTI” in 1976. in a short period avon agarbatti had
got a very good market,
Inspired by this popularity they launched their other products
like “RUTURAJ” in 1978 and “PAVITRA CHANDAN” in 1980 at that stage
turn over was about 8 to 19 lacks.
In 1984, they introduced “ MAJA AGARBATTI” this brand has got
favourable public response and the golden period of the company has
been started, then in 1989 they introduced “DENIM AGARBATTI”. Their
another products are camay , gulal , jaipur , magnet flora , rose
royal , kevada , shashi sugandh , etc. the products are available
in different packing in market.
Some products were dropped out because of scarcity of raw
materials and chemicals and some products are dropper out due to te
change in choice and preference of consumer i.e. Avon &
voice
Structure of organisation
In shashi industries structure of organization is easy and
strong in every aspect of management. We understand the
organization structure of shashi industries easily through above
under stable that can make the organization structure of shashi
industries. And we can predict the growth and development of
organization depends on the financial position as well as return on
investment.
PROCESS
To do he thing In the systematic manner is called a process. The
production process of agarbatti is listed below.
ASSORTMENT PROCESS
The manufacturing process starts with assortment of raw
materials of agarbattis. It means collection of raw incense,
imported perfumes, packing etc. unskilled workers do this work if
any problem arises, the worker inform his superior.
DEEPING PROCESS
The second most important step of the process is DEEPING
PROCESS. In this the bundles of of raw materials (each bundle
contains about 500gms. Agarbatti ) are deeped into a big container,
which contain perfumes, colours and other chemicals.
DRYING PROCESS
In this process the deeped agarbatti are kept in a big plate of
aluminium for drying. The agarbatti are dried for minimum 12 hours
and after that the agarbattis become finished product.
WEIGHTING PROCESS
In this fourth step , the agarbattis are weighted on electronic
weight machine. The weight are different like 20gms. , 25gms. ,
3gms. , 45gms. , 75gms. , 500gms. , and also according to number of
incense sticks as per the order of customer. The maximum weight is
500gms.
PACKING PROCESS
After all it is necessary to pack that agarbatti in attractive
manner. They are packing different boxes according to its grams
& flavors. For packing materials the firm has its own press in
Bombay named “MAJA Printing Press”.
QUALITY CONTROL SYSTEM
It is last but not least step, it is necessary to pass from
quality control system. The supervisor of the firm checked of the
product and if the quality is not satisfactory then it will go
again for responding.
TIME KEPING SYSTEM
The time keeping system is very essential for any of he
organization. In shashi industry the accouting time is 11 a.m. to 6
p.m. There is only one shift, the timing of manager, clerk,
superviser, peon, etc. are 9 to 6 Including 1 to 2.30 break for
lunch.
With the help of time keeping system they maintains register for
wage and salary. If workers come late. They will get less
salary.
EMPLOYEE SERVICE
Service and benefits provided by organization to the employee
play a very significant role for motivating them to achieve their
fully performance. The profit of the company also depends upon its
employees. So it is very necessary to delight the employees as they
are the precious assets for the company.
Mostly these facilities depends upon company’s internal
policy.
The SHASHI INDUSTRY also provides various types of facilities to
its employees are as under.
1 HOUSING FACILITIES
This firm provides housing facilities only to its security
guards and higher managerial level employees.
2 CANTEEN FACILITIES
It also provides canteen facilities to its workers working in
the factory and tea & meal facility to its employees at a very
reasonable rate.
3 MEDICAL FACILITIES
The first aid treatment at the time of accident is given to the
employees. Although accident doesn’t take place in the industry.
The company also takes the insurance policy of employees. At the
time of permanent disablement and long diseases, the firm also
provides medical treatment.
4 LOAN FACILITIES
The loan facility is also provided to their employees for any
important or urgent matter like marriage, disablement of work ,
etc. they provide loans without charging any interest.
5 ENTERTAINMENT FACILITIES
The firm also provides some type of entertainment facility like
one day picnic without taking any charge.
· Shashi products,
· Maja
·
· RuturaJ
·
· denim
· Camay hagzagone,
This above all the products manufacture by shashi industries in
vartej G.I.D.C
PRODUCTION AREA
The shashi industries involve employee are work for rapping and
packaging of agarbatties in one department and move the packaging
in cartoon some other department. There are large employment create
in the society because it is pour hand work no any technical
machinery is necessary. The following image of working area of
shashi industries.
So the above photo say it is pour mentally process of
manufacturing of agarbatties. There for human cooperation is most
important for the smooth running of the organization.
WAREHOUSING
In shashi industries have two stored department one is general
and second is special product stored department. It is very nice
bounded for the product convenience from the environment. In vartej
premises following are the area of stored department.
· Finished PRODUCT
general stored
In a general store raw material are store and keeping
systematically manner. Each and every item is marked and carried a
name plat of it. And send the all goods Ahmadabad for export as
well as out side the region for selling of products.
technical stored
In shashi industries all the activity based on the hand work but
the essence on agarbatties is through the machinery techniques.
MEANING,
Human resource management means to manage the people in proper
way. Human being is most valuable assets of the organization.
Therefore, any of the company recruitment and selection of employee
through eminent and expert people. Because, if wrong selection may
be create big problem for the organization.
Definition:
“Human resource management involves the task of handling the
human problem of an organization and it’s devoted to acquiring,
developing, utilization, and maintaining an efficient work
force.”
In short, we can say that personnel management is based on this
sentence,
“Mind your man and will mind all other things”
Each an every company has maintain separate HRM department.
Shashi industries also maintain separate personnel department for
the management of human being.
· Recruitment, selection, and induction through eminent &
expert staff.
· Training and development through expert and brilliant
manager.
· Job description.
· Promotion and transfer policy.
· Performance appraisal.
· Provident fund scheme for employee and employer.
· Grievances handling procedure.
· Collective bargaining agreement.
· Trade union.
· Personnel record.
Above this all function of HRM manage by the company through
expert people in the organization hence the shashi industries
running very good and smoothly in competitive market.
MEANING
Marketing is most important function and part of the management.
It is a key factor of sale of goods and services. Nothing can be
possible without marketing in any of the business field. Each an
every organization maintain the marketing department for long
survival &durable in modern business time.
Basically, marketing management is a program for analyzing
planning implement and controlling mutually desired exchange
between specific persons. Marketing management concern with product
planning, development, pricing, packaging, selling, etc. it is a
back born of the company.
In shashi industries, there is a separate marketing department,
which plays an important role in the Indian fragrance market, the
shashi industries currently 3rd rank in overall Indian market for
Aggarbatties and also famous in foreign market. This success is
based on good and speedy marketing of shashi industries for the
product.
In currently shashi industries main focus on large marketing of
product through market research and know the actual position of
product and provide satisfaction and actual requirement of
customer, and also quality of product. The shashi industries
marketing involve following step take by the company for marketing
of products.
· Product planning
· Market segmentation
· Pricing policy
· Advertisement
· Sales promotion
· Channel of distribution
· Marketing research
Therefore shashi industries are prominent role play in Indian
fragrance market though it’s above marketing strategy of the
organization.
In pricing policy involve the following different price to be
taken from the customers
Name of the product
weight Price
( Gram )
( per dozen )
Ruturaj 20 44.00
Ruturaj 70 158.00
Pavitra Chandan 20 44.00
Pavitra Chandan 30 90.00
Pavitra Chandan 70 158.00
Pavitra Chandan 90 190.00
Pavitra Chandan 180 340.00
Pavitra Chandan 400 636.00
Maja 20 69,00
Maja silver pack 30 102.00
Maja 80 208.00
Maja 160 372.00
Maja hexa gonal 22 78.00
Denim 20 72.00
Denim 40 130.00
Denim 75 228.00
Denim 150 416.00
Denim hexa gonal 22 82.00
Maja Dhoop stick 10 22.00
Rose Royal 20 57.00
Rose Royal Hegza gonal 22 78.00
Rose Royal 70 170.00
yes 25 80.00
yes 75 228.00
yes hegza gonal 22 85.00
Jaipur 25 80.00
Jaipur 75 228.00
Magnet flora 22 144.00
current 5 in 1 45(stick) 120.00
Sunday to Sunday 7in1 7 (stick) 189.00
Top six (6 in 1) 506.00
super six 95.00
Tirth 25 50.00
Tirth 70 138.00
Blue bird hegza gonal 22 80.00
Affile 18 stick 72.00
Affile hegza gonal 25 88.00
Gulab 70 138.00
Gulab hegza gonal 22 80.0
Camay 20 69.00
So the above all the product manufacturing shashi industries and
all the products price is determined on the basis of market serve
and consider the competitors price policy. This only possible
through marketing department and marketing department of shashi
industries is very well in Indian market and the based on good
marketing they got the 3rd rank in fragrance market of India.
INTRODUCTION
Finance is the blood of the business. “Finance Management is
that managerial activity which is concerned with the planning and
controlling of the firm’s financial resources.” Finance management
is the most important activity of the firm and it means that the
firm secures capital, if needs and employees it.
Finance management is mainly concerned with raising fund in the
suitable manner using the funds as profitably as possible, planning
future operations and controlling current performances and future
developments through financial accounting, cost accounting,
budgeting and other functions.
The Finance and Accounts Department of shashi industries plant
is located in the Administration Building, which is situated
outside the Plant factory gate. The Finance & Accounts (F &
A) Department is a service department and its name function is to
co-ordinate the financial activities at Plant Site. The F & A
department maintain the records as required under various statute
and get the same audited by Statutory Auditors under the functional
supervision and guidance of shashi industries at Bhavnagar.
FINANCIAL PLANNING
The planning means deciding in advance what is to be done, i.e.;
plan is projected course of action. Finance department also need
planning. Financial planning is carried on for the determination of
a financial requirement for a specified period that may arise in
future. This planning is done by keeping in view the past as well
as present and also future.
As far as shashi industries is concerned, there are three
different types of planning based on the time period-
Short term planning: This type of planning is done by keeping in
view cash, sales, purchase, use of funds, and preparation of cash
flow statements etc.The duration of short term plan is generally
for one year.
Medium term planning: In this, company takes decisions regarding
the circulating capital i.e.; the working capital cycle to operate
the business and current assets of the company. The time limit for
medium term planning is five years.
Long term planning: In this, plans about expansion,
modernization, technological change etc.are done. The duration of
this is five to ten years.
In shashi industries use all techniques of finance. The
industries also use the bank facilities to managing its finance.
Whenever the shashi industries require the money, they use the
finance according to their requirement it is very clear that if the
shashi industries got the 3rd rank in manufacturing of quality
incense sticks their management of finance may be very good.
LITERATURE REVIEW
The shashi industries was very good industries since 1994
because it’s become a partnership firm. After the company gradually
increases his performance and today they got 3rd rank in
manufacturing agarbatties. So, shashi industries involve many
student as well as employer working. They say if shashi do the
efficiency effort in CASH FLOW ANALYISIS in the organization.
There for every senior and workers of the company as well as
customer survey says shashi manufacturing good quality of
aggarbatties in the Indian market.
Cash management is a broad term that refers to the collection,
concentration, and disbursement of cash. It encompasses a company's
level of liquidity, its management of cash balance, and its
short-term investment strategies. In some ways, managing cash flow
is the most important job of business managers.
- Tim Koller, Marc Goedhart, David Wessels. 2005
About the cash analysis we can say that it is the lifeblood of
any business. In an organization we can see many activities to get
the cash from sales, debtors, sale of assets, investment etc. like
this the company spend also the cash in some areas – payment to
salaries, rent dividend, interest etc. Lastly, we can say that cash
flow reveals the inflow and outflow of cash during a particular
period.
Cash flow is the difference between the amount of cash flowing
in and out a company. Make sure to consistently include the
different types of cash flows.
- Keck, T., E. Levengood, and A. Longfield, 1998,
The value of the equity can be calculated by subtracting any
outstanding debts from the total of all discounted cash flows.
- Aswath Damodaran 2001 Investment Valuation
Calculating cash flows after the forecast period is much more
difficult as uncertainty, and therefore the risk factor, rises with
each additional year into the future. The continuing value, or
terminal value, is a solution that represents the cash flows after
the forecast period.
- Kubr, Marchesi, Ilar, Kienhuis. 1998. Starting Up. McKinley
& Company
OBJECTIVE
· To find the liquidity position of the SHASHI INDUSTRIES. For
the availability of cash and utilization of the cash by the
organization.
· It will help find to assess the company's ability to generate
positive cash flows in the future
· To assess its ability to meet its obligations to service
loans, pay dividends etc
· To assess the effect on its finances of major transactions in
the year.
· To study the firms liquidity.
· To learn about how company manage its cash & become such
well recognized profitable industry & if there is any problem
arise then what steps taken by company.
· To study the techniques used in organization.
· To study methods & techniques use for cash flow
analysis.
· Meeting day to day cash requirement of firm.
RESEARCH METHODOLGY
Research is the systematic collection, analysis and reporting of
data and making relevant finding to deal with a specific situation
faced by the company. The data can be collected and analyzed with
the help of diagram and charts, which help in arriving to a
conclusion.
In general sense research methodology means how to research and
which best way select for finding out data from the company during
the industrial training. The main objective of the research
methodology is choosing the best path for collecting required
data.
The report is on “cash flow statement” at SHASHI INDUSTRIES. The
following research methodology is being followed for the project
work.
Type of data used
For the preparation of report the data used is secondary
data
Data collection
The following sources of data are used for preparation of the
report.
Annual report of “ SHASHI INDUSTRIES”
Website of “ SHASHI INDUSTRIES”
RESEARCH DESIGN & METHODOGY
Research design is blue print of data collection, measurement
& analysis of data. It indicate both structure of problem &
plan of investigation used to obtain empirical evidence on those
relationship.
There are generally three types of research design which are as
follows .
1 .EXPLORATORY STUDIES
2. DESCROPTIVE STUDIES
3. CAUSAL STUDIES
For the research design I have selected DESCRIPTIVRE STUDIES
because as cash flow analysis is topic in which there must detail
description of all transaction are required to study so that we get
idea how cash is collect from various sources & utilized in
organization . Further while doing in depth study we get complete
picture of process that follow in organization.
Significant of study
Aim of work help to reach destination by problems arises in the
way .work become more efficient if purpose for doing work is
clear.
Limitations:
The limitation of my research work is
1) The time available was not sufficient enough to probe deeper
for a more detailed study.
2) Limitation of the secondary data used for making the study
can be considered as limitation of the study itself.
3) Similarly, the limitation of the various tools used for
analysis can be a limitation of the study.
THEORATICAL FRAMEWORK
Cash flow is the movement of cash into or out of a business,
project, or financial product. It is usually measured during a
specified, finite period of time. Measurement of cash flow can be
used for calculating other parameters that give information on a
company's value and situation. Cash flow can e.g. be used for
calculating parameters:
To determine a project's rate of return or value. The time of
cash flows into and out of projects are used as inputs in financial
models such as internal rate of return and net present value.
To determine problems with a business's liquidity. Being
profitable does not necessarily mean being liquid. A company can
fail because of a shortage of cash even while profitable.
As an alternative measure of a business's profits when it is
believed that accrual accounting concepts do not represent economic
realities. For example, a company may be notionally profitable but
generating little operational cash (as may be the case for a
company that barters its products rather than selling for cash). In
such a case, the company may be deriving additional operating cash
by issuing shares or raising additional debt finance.
Cash flow can be used to evaluate the 'quality' of income
generated by accrual accounting. When net income is composed of
large non-cash items it is considered low quality.
To evaluate the risks within a financial product, e.g. matching
cash requirements, evaluating default risk, re-investment
requirements, etc.
Cash flow is a generic term used differently depending on the
context. It may be defined by users for their own purposes. It can
refer to actual past flows or projected future flows. It can refer
to the total of all flows involved or a subset of those flows.
Subset terms include net cash flow, operating cash flow and free
cash flow.
Statement of cash flow in a business's financials
The (total) net cash flow of a company over a period (typically
a quarter or a full year) is equal to the change in cash balance
over this period: positive if the cash balance increases (more cash
becomes available), negative if the cash balance decreases. The
total net cash flow is the sum of cash flows that are classified in
three areas:
1. Operational cash flows- Cash received or expended as a result
of the company's internal business activities. It includes cash
earnings plus changes to working capital. Over the medium term this
must be net positive if the company is to remain solvent.
2. Investment cash flows- Cash received from the sale of
long-life assets, or spent on capital expenditure (investments,
acquisitions and long-life assets).
3. Financing cash flows- Cash received from the issue of debt
and equity, or paid out as dividends, share repurchases or debt
repayments.
OBJECTIVE AND IMPORTANCE OF THE STATEMENT
OBJECTIVE
The cash flow statement has become very useful in financial
accounting for more than reason. A cash flow statement provides
information for planning of short term needs of the firm. Cash flow
statement highlight a changes in the financial structure of
enterprises changes in various sources of cash, debt & equity
in the statement.
Cash flow statement shows from where & to what extend cash
has been received from different sources. It helps in allocation of
resources in the light of the nature of cash available.
The information about the cash flow of on enterprise is useful
in providing users of financial statement with a basis to assess
the ability of the utilize those cash flow. The economic decisions
that are taken by the user require an evaluation of an enterprise
to generate cash and cash equivalent and the timing and certainty
of their generation.
IMPORTANCE
· Cash flow statement helps the management in taking short term
financial decision.
· It enables the management to account for situation when
business has earned huge profit yet run without money or when it
has suffered a loss & still as plenty of money at the bank.
· It gives the clear picture of cash in flow & out from the
operation. It is there for, very useful to internal financial
management the possibility of retiring long term debts, in planning
replacement of plant facility or formulating dividend policy.
· Cash flow statement act like a controller for the management.
A comparison of cash flow statement of previous year with the
budget for that would indicate to that extend the resources of the
enterprise where raise it & applied according to the plan which
may highlight trends of the moment of cash of the company.
· Cash flow statement is useful in evaluating financial policy
& current cash position. The cash flow statement will enable
the management in planning & co-ordinate the financial
operation probably because cash flow statement is prepared on
estimated bases for the next accounting period.
· So, that the management come to know how much cash will be
needed and at which time period the recruitment of cash will be
raised. What are the internal sources & external sources of
cash especially this statement is important for the preparing the
cash budget.
HOW TO PREPARE THE CASH FLOW STATEMENT
The principal different between a fund flow statement and cash
flow statement lies in amount shows as resources provided by
business operation. Other items which are to be included in the
cash flow statement are cash receipt & cash payment like issue
of equity share, cash sale, cash purchase, etc.
Normally cash flow statement is prepared annually, half,
quarterly, or monthly, with the help of two balances, one at
beginning of the year & other at operation of the company. The
measurement depend upon determining cash receipt & disbursement
over a given period, where as, income is determining revenue &
expenses of the given period. Therefore a number of items appear on
either the cash flow statement of the income statement but not on
both. The item, which is not related with any kind of cash out lay,
will not be included in the cash flow statement. In following way
the flow of cash can be summarized.
All the increases in the current assets excluding cash &
decreases in current liability, which increases working capital and
decreases in cash balance.
All decreases in the current assets excluding cash &
increase in current liability, which causes decrease in working
capital and increase in cash balance.
SOURCES AND USES OF CASH OF THE COMPANY
USES OF CASH
In SHASHI INDUSTRIES the uses of money normally uses for the
payment of revenue expenditure in form of cash. Cash payment is
made here for two kinds of uses.
· CASH IN WAY OF REVENUE EXPENDITURE
· CASH FOR CAPITAL EXPENDITURE
The following are revenue expenditure for preparing a monthly
cash budget of the company
· salary payment
· GEB bill payment
· Excise duty payment
· Payment of sales tax
· Raw material payment
· Container payment
· Payment of transfer of goods
· Other routine expenses
· Income tax payment
However the salary is paid to the employee by cash or cheque and
all the payment to the supplier of the goods are made as per the
bill and due date of payment.
For the capital expenditure the payment is done the approval of
the expenditure. Actually major capital expenditure are made with
plant expansion, process improvement, replacement of machinery,
capacity expansion etc.
SOURCES OF CASH
Normally the banks are main sources to provide required cash for
the company. In cash of cash needs of the company, they make date
wise call. Money requirement is made usually from Bangalore &
sometime from local level bank. In case of urgent requirement
telephonic transfer system is used.
COMPARISION OF CASH FLOW AND FUND FLOW STATEMENT
Fund flow statements (FFS) is prepared to show movement of funds
during a period, while the term funds used to denote net working
capital (NWC). The statement has mainly two segments –uses of funds
and sources of funds. The difference between sources and uses
represent change in net working capital (NWC).
One the other hand, cash flow statement (CFS ) is prepared, in
interpreting the term funds as cash. The statement shows the
sources and uses of cash and cash equivalent and mainly it is used
for short term cash planning.
Only changes in non-current items of the balance sheet appear in
the body of fund flow statement (FFS) and other changes effecting
individual current assets or current liabilities do not find place
in the fund flow statement (FFS). This involves preparation of a
statement of changes in Net Working Capital.
Fund flow statement reflects the movement of changes in Net
Working Capital, while cash flow statement shows the movement in
cash inflow and outflow of the company.
Fund from operation in the fund flow statement contain net
profit after meeting all the expenses as shown in profit and loss
account plus non-fund expenses like depreciation.
On the other hand, cash from operation in the cash flow
statement is the net profit plus non cash expenses like
depreciation, writing off bad debts, outstanding preliminary
expenses, etc. adjustments for changes in the of current assets and
current liability are also made to compute cash from
operations.
Cash flow statement is useful in short-term planning for making
cash budget, while fund flow statement is useful in long-term
planning to know the net working capital of the company.
Cash flow statement, reflecting movement in cash indicates
liquidity of the enterprise and is of interest of bankers and
lenders. On the other hand, fund flow statement indicates changes
in working capital which is important for internal management of
the company.
LIMITATION OF THE CASH FLOW STATEMENT
Some of the limitations of the cash flow statement are as
follows:
AAs the enterprise shifts from strictly cash basis, enters into
credit transactions as well takes into account prepared and accrued
items, the net income no doubt would generally represent an
increase in working capital. Yet equating net income in cash flow
for such enterprise would be inaccurate and misleading since a
number of non cash items affects the net income of the firm.
B Cash flow is part of working capital. The volume of cost
flowing in any part of the system and the speed at which it flows
determines the amount of capital. Tied up sometimes in any segment
of the enterprise or business. At any given time cash flow analysis
used in connection with ratio analysis provided a barometer for
measuring the aforesaid change and financing problem of the
business much more manageable.
Cthere are two methods of cash flow statement preparation;
1) DIRECT METHOD
2) INDIRECT METHOD
Sometimes it can be possible that due to the of wrong method the
accurate cash the company can not make proper cash planning.
Preparation methods:
The direct method of preparing a cash flow statement results in
a more easily understood report. The indirect method is almost
universally used, because FAS 95 requires a supplementary report
similar to the indirect method if a company chooses to use the
direct method.
Direct method
The direct method for creating a cash flow statement reports
major classes of gross cash receipts and payments. Under IAS 7,
dividends received may be reported under operating activities or
under investing activities. If taxes paid are directly linked to
operating activities, they are reported under operating activities;
if the taxes are directly linked to investing activities or
financing activities, they are reported under investing or
financing activities.
Indirect method
The indirect method uses net-income as a starting point, makes
adjustments for all transactions for non-cash items, then adjusts
from all cash-based transactions. An increase in an asset account
is subtracted from net income, and an increase in a liability
account is added back to net income. This method converts
accrual-basis net income (or loss) into cash flow by using a series
of additions and deductions.
Cash flow activities
The cash flow statement is partitioned into three segments,
namely:
1) Cash flow resulting from operating activities;
2) Cash flow resulting from investing activities; and
3) Cash flow resulting from financing activities.
The money coming into the business is called cash inflow, and
money going out from the business is called cash outflow.
Operating activities
Operating activities include the production, sales and delivery
of the company's product as well as collecting payment from its
customers. This could include purchasing raw materials, building
inventory, advertising, and shipping the product.
Under IAS 7, operating cash flows include
Receipts from the sale of goods or services
Receipts for the sale of loans, debt or equity instruments in a
trading portfolio
Interest received on loans
Dividends received on equity securities
Payments to suppliers for goods and services
Payments to employees or on behalf of employees
Interest payments (alternatively, this can be reported under
financing activities in IAS 7, and US GAAP)
Items which are added back to [or subtracted from, as
appropriate] the net income figure (which is found on the Income
Statement) to arrive at cash flows from operations generally
include:
· Depreciation (loss of tangible asset value over time)
· Deferred tax
· Amortization (loss of intangible asset value over time)
Any gains or losses associated with the sale of a non-current
asset, because associated cash flows do not belong in the operating
section.(unrealized gains/losses are also added back from the
income statement)
Investing activities
Examples of investing activities are
· Purchase or Sale of an asset (assets can be land, building,
equipment, marketable securities, etc.)
· Loans made to suppliers or received from customers
· Payments related to mergers and acquisitions
Financing activities
Financing activities include the inflow of cash from investors
such as banks and shareholders, as well as the outflow of cash to
shareholders as dividends as the company generates income. Other
activities which impact the long-term liabilities and equity of the
company are also listed in the financing activities section of the
cash flow statement.
Under IAS 7,
· Proceeds from issuing short-term or long-term debt
· Payments of dividends
· Payments for repurchase of company shares
· Repayment of debt principal, including capital leases
For non-profit organizations, receipts of donor-restricted cash
that is limited to long-term purposes
· Items under the financing activities section include:
· Dividend paid
· Sale or repurchase of the company's stock
· Net borrowings
· Payment of dividend tax
Disclosure of non-cash activities
Under IAS 7, non-cash investing and financing activities are
disclosed in footnotes to the financial statements. Under US
General Accepted Accounting Principles (GAAP), non-cash activities
may be disclosed in a footnote or within the cash flow statement
itself. Non-cash financing activities may include
· Leasing to purchase an asset
· Converting debt to equity
· Exchanging non-cash assets or liabilities for other non-cash
assets or liabilities
· Issuing shares in exchange for assets
ANALYSIS
The study of accounting is not restricted to recording of
business transactions in books of accounts and preparing necessary
accounts but to analyze and interpret the financial health of the
enterprise. Analysis of financial statements reveals the underlying
significance of the items composed in them. Analysis breaks down
the complex set of facts and figures in to simple elements.
Interpretation is the next step. It consists in explaining the real
significance of these statements.
Thus, the analysis of financial statement has to be undertaken
to suit the purpose for which it is required. Analysis of financial
statements is undertaken with a variety of objectives like:
1) Determination of the health of the business enterprise.
2) Judging the solvency of the enterprise
3) Management can measure the operational efficiency of the
Organization.
4) To know liquidity position of the organization
Many companies are interested in calculating cash flow analysis,
for that personal use and they are use number.
Management of the company would be interested in every aspect of
the financial analyses because they have responsibility to set that
the resources of the firm are used more effectively and
efficiently.
The shashi industries analyses of CASH FLOW for the organization
because of knowing of cash available and utilization of the cash.
And how it would be distributed among the various expenses.
RATIO ANALYSIS
Net Profit Ratio
What Does Net profit Ratio Mean?
Net profit ratio is the ratio of net profit (after taxes) to net
sales. It is expressed as percentage.
Net profit ratio is used for knowing the profitability of the
company as follows;
Net Profit Ratio : (Net profit / sales) X 100
For 2009-10
Net Profit Ratio : (Net profit / sales) X 100
= (463953 / 48814199) X 100
= 0.95
For 2010-11
Net Profit Ratio : (Net profit / sales) X 100
= (498237/ 59020214) X 100
= 0.84
INTERPRETATION:
From the above ratio we can conclude that in the year 2009-10
the net profit ratio is 0.95 and in the year 2010-11 is 0.84 so it
is greater than the current year.thus the profitability of the firm
is decreased in the current year.
Thus, the company’s efficiency is decreased in the current
2010-11 year. Company should have to take corrective steps to take
to improve the net profit ratio.
Quick ratio
What Does Quick Ratio Mean?
An indicator of a company's short-term liquidity. The quick
ratio measures a company's ability to meet its
short-term obligations with its most liquid assets. The higher
the quick ratio, the better the position of
the company.
The quick ratio is calculated as:
For 2009-10
= currant assets - inventory/ currant liabilities
=19604934 - 70,86,018.00 / 2,11,993.80
= 0.59
For 2010-11
= currant assets - inventory/ currant liabilities
= 78840433 - 4,16,88,768 / 2,69,493
= 0.27
INTERPRETATION:
From the above ratio we can conclude that in the year 2009-10
quick ratio is 0.59 and in 2010-11 quick ratio is 0.27. obviously
it is less than the previous year. So we can say that company
effectiveness of working is decreased is in the current year.
Thus, company should have to find the reason for the decreased
in the quick ratio and should have to take corrective steps to
remove it.
Current Ratio
Current ratio may be defined as the relationship between current
assets and current liabilities. This ratio is also known as
"working capital ratio". It is a measure of general liquidity and
is most widely used to make the analysis for short term financial
position or liquidity of a firm. It is calculated by dividing the
total of the current assets by total of the current
liabilities.
Formula:
Following formula is used to calculate current ratio:
Current Ratio = Current Assets / Current Liabilities
For 2009-10
Current Ratio = Current Assets / Current Liabilities
= 8, 40,75,290 / 2020150
= 4.16:1
For 2010-11
Current Ratio = Current Assets / Current Liabilities
YEAR 2010-11 = 9,02,82,362 / 20,32,212
= 4.46:1
INTERPRETATION:
From the above chart we can conclude that current ratio is 4.46
in the year 2009-10 and 4.16 in the year 2010-11. So it shows
decreased in the current ratio. It indicates that liquidity of the
firm is decreased in the current year 2010-11 as compared to the
previous year 2009-10.
Thus, the company should have to take corrective steps and find
the reasons for decreased in the current ratio.
Cash ratio
The ratio of a company's total cash and cash
equivalents to its current
liabilities. The cash ratio is most commonly used as
a measure of company liquidity. It can therefore determine if, and
how quickly, the company can repay its short-term debt. A
strong cash ratio is useful to creditors when deciding how much
debt, if any, they would be willing to extend to the asking
party.
Formula:
Following formula is used to calculate cash ratio
Cash ratio = cash / current liability
For 2009-10
Cash ratio = cash / current liability
= 11,20,986 / 2,11,993
= 5.28
For 2010-11
Cash ratio = cash / current liability
= 2,57,13,73 / 2,69,493
= 9.54
INTERPRETATION:
From the above cash we can conclude that in the year 2009-10 the
cash ratio is 5.28 and in the 2010-11 ratio is 9.54 it shows
positive ratio as compared to the previous year. It indicates that
cash balance of the company is increased about doble in the current
year. It shows that company has enough cash to compansate its short
term liability.
Thus, we can say that cash ratio is higher or about double in
the current year as compared to the previous year. The company
should have to increase cash ratio to pay the liability of
firm.
Equity Multiplier Ratio
This ratio shows a company's total assets per
Rupees of stockholders' equity. A higher equity multiplier
indicates higher financial leverage, which means the company is
relying more on debt to finance its assets.
Formula:
Following formula is used to calculate Equity multiplier
ratio
Equity multiplier ratio = Total asset / Total equity
For 2009-10
Equity multiplier ratio = Total asset / Total equity
= 29359993 / 14717210
= 1.99
For 2010-11
Equity multiplier ratio = Total asset / Total equity
= 98511493 / 89721210
= 1.09
INTERPRETATION:
From the above diagram we can say that equity multiplier ratio
of the firm is 1.99 in 2010-11 and 1.09 in 2009-10. Obvously,
prevous ratio is higher than the current year. It indicates that
the company’s total asset per rupees of stockholder equity is less
in the current year.
Thus,the company should have to find the reason behind the
decreasement in th equity multiplier ratio. And take corrective
steps to improve it.
The Miller-Orr Model
Most firms don’t use their cash flows uniformly and also cannot
predict their daily cash inflows and outflows. Mille-Orr Model
helps them by allowing daily cash flow variation.
Under the model, the firm allows the cash balance to fluctuate
between the upper control limit and the lower control limit, making
a purchase and sale of marketable securities only when one of these
limits is reached. The assumption made here is that the net cash
flows are normally distributed with a zero value of mean and a
standard deviation. This model provides two control limits – the
upper control limit and the lower control limit as well as a return
point. When the firm’s cash limit fluctuates at random and touches
the upper limit, the firm buys sufficient marketable securities to
come back to a normal level of cash balance i.e. the return point.
Similarly, when the firm’s cash flows wander and touch the lower
limit, it sells sufficient marketable securities to bring the cash
balance back to the normal level i.e. the return point.
The lower limit is set by the firm based on its desired minimum
“safety stock” of cash in hand The firm should also determine the
following factors:1. An interest rate for marketable securities,
(i)2. A fixed transaction cost for buying and selling marketable
securities, (c)3. The standard deviation if its daily cash flows,
(s)
The upper control limits and return path are than calculated by
the Miller-Orr Model as follows:Distance between the upper limits
and lower limits is 3Z.
(Upper limit – Lower limit) = (3/4 C Transaction Cost C Cash
Flow Variance/Interest Rate) 1/3
Z = (3/4 C cs2/i) 1/3
If the transaction cost is higher or cash flows shows greater
fluctuations, than the upper limit and lower limit will be far off
from each other. As the interest rate increases, the limits will
come closer. There is an inverse relation between the Z and the
interest rate. The upper control limit is three times above the
lower control limits and the return point lies between the upper
and lower limits.
Hence,Upper Limit = Lower Limit + 3ZReturn Point = Lower Limit +
Z
So, the firm holds the average cash balance equal to:Average
Cash Balance = Lower Limit + 4/3 Z
The Miller-Orr Model is more realistic as it allows variation in
cash balance within the lower and upper limits. The lower limit can
be set according to the firm’s liquidity requirement. To determine
the standard deviation of net cash flows the pasty data of the net
cash flow behaviour can be used. Managerial attention is needed
only if the cash balance deviates from the limits.
FINDING
· Cash flow statement is prepared by receipt and payment
method.
· From the balance sheet of the company we can say that reserve
or provision of the company is also good. It will consumed by the
company in case of emergency.
· I found from the balance sheet of the company that mostly cash
transaction is to be done by the company.
· The ratio analysis of the company gives data that there is
scarcity of the cash in the company because quick ratio and current
ratio of the firm is less as compared to the previous year.
· Net profit Ratio of the firm is also decreased in the current
year as compared to the previous year. So we can say that profit of
the company is also decreased in current year.
· Current ratio of the company is also decreased in the current
year as compared to the previous year. it indicates that it ability
to pay short term debt is less in this year 2010-11.
· Cash ratio of the company is greater in the current year as
compared to the previous year So, Company has maintain enough cash
balance in the company to pay its short term liability.
.
RECOMMENDATION
After studying data analysis, I would like to suggest some
points as under:
.
1 Shashi industries should establish in every city for his own
agency for sale only aggarbatties.
2 If the company wants to maintain its position they have to
advertise his product in the market.
3 From the data available I find that firm should concentrate on
the Maza product because its sales are very high compared to other
products.
4 Firm should have to expand his product for the maximization of
the profit.
5 Currently, firm is running in weak position as compared to the
previous year so they have to increase the sales by taking
corrective steps.
For e.g.Like advertising, some scheme giving to the buyers.
CONCLUSION
I had a great experience in taking training SHASHI INDUSTRIES
Pvt. Ltd. at VARTEJ, G.I.D.C... It is really a progressive company.
On seeing its production, it is tremendous development for any new
company; from all points of view is perfect in its work of SHASHI
INDUSTRIES.
It employees around 110 workers, so from social point of view,
it increases workers esteems by giving them earnings.
The brand name “SHASHI INDUSTRIES” is now becoming house hold
because it is very easy to remember and its product quality cannot
forget the name SHASHI INDUSTRIES.
All employees and management works together without any conflict
and with dull responsibility. And I give my best wishes to SHASHI
INDUSTRIES to achieve more and more success and to become world
famous.
.
BIBLIOGRAPHY
For the information I have referred to the following books and
contacts in this project and I am including all this details from
the under mentioned books as well as websites.
٭The SHASHI story book - provided by the library
٭Annual report of the company (2010-2010)
٭Financial management (Prasanna chandra ,6th edition)
٭
(http://mortgageprocess.wordpress.com/2009/03/03/cash-flow-analysis-from-financial-
books/)
٭http://www.seminarprojects.com/Forum-mba-project-ideas
APPENDIX
PROFIT & LOSS ACCOUNT FOR THE YEAR 2010-2011
Particulars
Amount
Incomes
Sales
5,90,20,214
Closing stock
88,90,020
Opening stock
55,000
Other income
2,61,000
68226234
Expenditure
Opening stock
60,20,200
Direct expenses
41,84,321
Administrative expenses
28,85,500
Selling & distribution expenses
29,97,445
Financial expenses
9,90,000
Partners payment
4,25,000
Depreciation
9,00,000
18402466
Profit
4,98,237.68
5,60,86,267.62
Balance Sheet end of the year 2010-2011
Particulars
Amount
Amount
Sources of fund
partners capital
8,21,53,373
Loan funds
Secured loan
59,29,422
Unsecured loan
16,38,415
75,67,837
8,97,21,210
Application of funds
Fixed assets
1,20,64,534
Investments
76,06,526
Current assets, loans and advances
Inventories
4,16,88,768
Sundry debtors
1,14,37,929
Cash and Bank
2,57,13,736
Loans and advances
1,14,41,929
9,02,82,362
Less: current liabilities
2,69,493
Provisions
3,63,286
Sundry debtors
1,95,99,433
2,02,32,212
7,00,50,150
8,97,21,210
Profit & loss A/c for the year ended 2009-10
Particulars
Amount
Incomes
Sales
4,88,14,199.27
Closing stock
70,86,018.00
Opining stock
34,735.00
Other income
1,51,315.00
5,60,86,267.62
Expenditure
Opining stock
57,31,185.00
Direct expenses
31,92,103.14
Administrative expenses
27,86,614.97
Selling & distribution expenses
28,95,479.25
Financial expenses
8,64,368.56
Partners payment
4,20,000.00
Depreciation
8,03,186.00
Profit before tax
3,89,29,377.17
3,89,29,377.17
5,56,22,314.09
Profit
4,63,953.53
5,60,86,267.62
Balance Sheet end of the year 2009-10
Particulars
Amount
Amount
Sources of fund
partners capital
7,21,53,373.43
Loan funds
Secured loan
58,79,422.04
Unsecured loan
16,22,415.00
70,37,883.51
1,47,17,210.47
Application of funds
Fixed assets
71,11,534.05
Investments
26,43,526.00
Current assets, loans and advances
Inventories
70,86,018.00
Sundry debtors
1,13,97,929.68
Cash and Bank
11,20,986.48
Loans and advances
14,31,929.57
2,10,36,863.73
Less: current liabilities
2,11,993.80
Provisions
3,23,286.00
Sundry debtors
1,95,39,433.51
1,60,74,713.31
49,62,150.42
1,47,17,210.47
Indu Management InstitutePage 3
