Cashflow Analysis

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”.

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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.

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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.

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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.

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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 .

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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.

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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.

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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.

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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.

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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.

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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.

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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

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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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http://zuaricements.com/scripts/productsPPCsuperfine.aspx

http://zuaricements.com/scripts/productsOPC43.aspx

http://zuaricements.com/scripts/productsOPC53.aspx

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

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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

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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.

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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


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


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:


dividend on investments (60.18+1.65+76.00)


Operating profit before working changes and other

Adjustments



-(Increase)/decrease in trade and other receivables


-(increase)/decrease in trade and other payables

Cash generated before extraordinary items

Extraordinary item: Compensation paid to employees

Under Voluntary retirement scheme & other schemes.


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




Interest received

Loans repaid by Sri Vishnu cement ltd

Dividend on investments



Investments in Sri Vishnu Cement ltd

Investments in Sitapuram power ltd

Business advance for power management

Loans to Sri Vishnu cement ltd



Cash Inflow:

Borrowings

Sales Tax deferral

Increase in trade deposits from stockiest

and dealers



Increase/decrease in cash credit and demand

loans


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 (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


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



Particulars

31-3-2008

Rs lakhs

31-3-2008

Rs lakhs



Adjustments for:

Cash outflows:

Depreciation amortization of goodwill

Interest and other finance cost

(5204.23+1799.20+950.93)

Cash inflows:


dividend income(1118.67+0.39+194.82)





-(Increase)/decrease in sundry debtors


Increase in current liabilities and provisions



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


Particulars

31-3-2008

Rs lakhs

31-3-2008

Rs lakhs




Interest received

Dividend received



Purchase of shares in SVCl



Cash Inflow:

Proceeds from borrowings



Net Cash generated from Financing activities ( C )


(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)


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


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.




also paid.

Table-7

44



Amount

8560.73

3974.42

-4493.67


Sources and applications of cash operating activities during 2008-09

Particulars

31-3-2009

Rs lakhs

31-3-2009

Rs lakhs



Adjustments for:

Cash outflows:



(5377.68+1799.20+534.19)

Cash inflows:


dividend income(745.19+8.39+475.92)




increase in inventories

-(Increase)/decrease in sundry debtors


Increase in current liabilities and provisions




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


Particulars

31-3-2009

Rs lakhs

31-3-2009

Rs lakhs




Interest received

Dividend received





Cash Inflow:




Repayment of non convertible borrowings



(A+B-C) : (32524.25-47722.06+7959.12)



year(30303.02-16999.13-3472.62)


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


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.




also paid.


31-3-2010 31-3-2010

47


Cash from investing activities (47722.06)Cash from financing activities 7959.12

Amount

32524.25

-47722.06

7959.12


Particulars Rs lakhs Rs lakhs



Adjustments for:

Cash outflows:



(5488.32+1799.20+424.13)

Cash inflows:

interest income and dividend income

(141.42+116.50)




Decrease/(increase) in inventories

Increase in sundry debtors

Decrease/(increase) in loans and advances

(Decrease)/Increase in current liabilities and provisions




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




Interest received

Dividend received





Cash Inflow:






(A+B-C) : (26846.96+(39885.66)+29347.12)



year(30303.02-16999.13-3472.62)


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.




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



Amount

26846.96

-39885.66

29347.12


Table - 11 Sources and applications of cash operating activities during 2010-11

Particulars

31-3-2011

Rs lakhs

31-3-2011

Rs lakhs



Adjustments for:

Cash outflows:



(5688.32+2099.20+500.13)

Cash inflows:

interest income and dividend income

(141.42+158.58)




Decrease/(increase) in inventories

Increase in sundry debtors

Decrease/(increase) in loans and advances

(Decrease)/Increase in current liabilities and provisions




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


Particulars

31-2-2011

Rs lakhs

31-3-2011

Rs lakhs




Interest received

Dividend received





Cash Inflow:






(A+B-C) : (32994.33+49174.48)-30237.12)



year(32524.25-47722.06-795912)


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


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






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


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


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


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


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


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


Personnel cost 4,030.09 3,604.81

Other expenses 29,017.00 25,119.28


Amortization of goodwill 1,7,99.20 1,799.20


87,133.05 72,851.03


Provision for tax 12,881.45 6,542.84

- Current tax - (982.00)

- MAT credit of earlier years - (713.59)


- 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


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


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



Other expenses 29,052.66 29,017.00


Amortization of goodwill 1,799.20 1,799.20


81,805.61 87,135.02



- Current tax - -

- MAT credit of earlier years - -


- 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


Rs. in lakhsParticulars 31-12-2010 31-12-2009


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


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



Other expenses 32,052.66 29,052.66


Amortization of goodwill 2,099.20 1,799.20


88681.61 81,805.61



- Current tax - -

- MAT credit of earlier years - -


- 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


Rs. in lakhsParticulars 31-12-2011 31-12-2010


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

http://www.google.com/

http://www.ZuariCementLimited.com/

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