Cashflow Project+sandhya 552g2s

PREFACE Cash flow analysis is the study of the cycle of your business' cash inflows and outflows, with the purpose of maintaining an adequate cash flow for your business, and to provide the basis for cash flow management. Cash flow analysis involves examining the components of your business that affect cash flow, such as s receivable, inventory, s payable, and credit . By performing a cash flow analysis on these separate components, you'll be able to more easily identify cash flow problems and find ways to improve your cash flow. Cash-flow in financial analysis means net income or profit obtained after adding back expense items which currently do not use cash such as depreciation. It may also exclude revenue items, which do not currently provide funds. It comes in two varieties — gross and net. Depreciation is not a tangible expense which is paid for by drawing a cheque but is a sum set aside each year, whether there is profit or not, for the replacement of an asset when it is worn-out. Such sums of money can be used to buy new plant or they can be kept in a bank, invested in gilt-edged securities or used in any way that the directors may choose. They, in fact form part of the “cash-flow” which is the amount retained in the business after paying off all expenses including taxes and dividends. Gross cash-flow is the net profit after tax plus the provision for depreciation. Net cash-flow is obtained from the gross figure by deducting the amount distributed as dividend on preference and ordinary shares. Of the two, net cash-flow is the more important and commonly used because it represents the actual amount of cash retained in the business after all outgoings including dividends. It is frequently assumed that there will always be a cash-flow at least equal to the provision for depreciation or other adjustments not involving cash. This will be true only if the total revenue (sales and other income) for a period fully covers all of the expenses including depreciation and other write-offs. If the operations for a period result in a loss and if the loss exceeds the “noncash” adjustments, the cash-flow will be negative instead of being positive.

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CHAPTER-1 INTRODUCTION

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INTRODUCTION CASH FLOW STATMENT

Cash Flow Statement Overview The cash flow statement shows a company's money flow in and out over a fixed period of time. Most companies report their cash flow statement on a quarterly or monthly basis. The cash flow is broken out into three reporting areas: (1) Operating, (2) Investing, and (3) Finance. The cash flow statement was originally known as the flow funds statement or statement of changes in financial position. 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. Cash includes currency, checks on hand, and deposits in banks. Cash equivalents are short-term, temporary investments such as treasury bills, certificates of deposit, or commercial paper that can be quickly and easily converted to cash. Your business will use cash to pay bills, repay loans, and make investments, allowing you to provide goods and services to your customers. Your company will use cash to generate even more cash as a result of higher profits. 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. It is imperative that you, the business owner, be able to successfully prepare a statement of cash flow. This discussion provides a detailed look into the various sections of a cash flow statement. It also describes two methods used to calculate cash flow from operating activities, indirect and direct with examples that will give you an edge when it comes time to prepare a cash flow statement of your own.

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Purpose of the Cash Flow Statement The cash flow statement is intended to provide information on a firm's liquidity or solvency. The cash flow provides a clear understanding of a company's financial resources at a given point in time. The cash flow statement shows cash coming into a company (from sales, income from investments, asset sales) and going out (payments to suppliers, investment), the raising of capital (money borrowed or raised from shareholders) and the payment of returns of capital (interest and dividends) and tax. Like profit, cash flow can be measured at a number of levels. For example, operating cash flow roughly corresponds to operating profit with the effects on non-cash items stripped out. The main items in a typical cash flow statement are (in order): •

cash flow from operating activities

•

returns on investments and servicing of finance

•

taxation

•

capital expenditure and financial investments

•

acquisitions and disposals

•

equity dividends paid

•

management of liquid resources

•

financing

The returns on investments and servicing of finance includes dividends received (e.g. from subsidiaries) and interest from fixed interest securities and bank deposits. It will also show payments to lenders: both banks and holders of a company's fixed interest securities.

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Capital investments and financial investments will show the cashflow relating to the purchase and disposal of fixed assets. Liquid resources are cash and liquid, short term, investments. All items in the cash flow statement can be significantly different from equivalent items on the P & L. This is what makes the cash flow so valuable (it is not susceptible to manipulation), but it can also make it less meaningful (there are good reasons for accruing in the other ing statements). Operating cash flow is very often looked at by investors. The capital expenditure item is a quicker way of finding out how heavily the company is investing than looking at the balance sheet (and then correcting for depreciation etc.) but it has two weaknesses: it does not record purchases not yet paid for and it does not allow one to separate capital expenditure on operating assets from long term financial investments. A more complex use of the cashflow statement is the calculation of free cash flow, which can be used in valuation ratios and DCF valuations. All the items in the cashflow statement provide a useful check on items in the other ing statements and are a vital input to the financial models used for forecasting. The bulk of the positive cash flow stems from cash earned from operations, which is a good sign for investors. It means that core operations are generating business and that there is enough money to buy new inventory. The purchasing of new equipment shows that the company has cash to invest in inventory for growth. Finally, the amount of cash available to the company should ease investors' minds regarding the notes payable, as cash is plentiful to cover that future loan expense. Of course, not all cash flow statements look this healthy, or exhibit a positive cash flow. But a negative cash flow should not automatically raise a red flag without some further analysis. Sometimes, a negative cash flow is a result of a company's decision to expand its business at a certain point in time, which would be a good thing for the future. This is why analyzing changes in cash flow from one period to the next gives the investor a

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better idea of how the company is performing, and whether or not a company may be on the brink of bankruptcy or success.

Tying

the

CFS

with

the

Balance

Sheet

and

Income

Statement

As we have already discussed, the cash flow statement is derived from the income statement and the balance sheet. Net earnings from the income statement is the figure from which the information on the CFS is deduced. As for the balance sheet, the net cash flow in the CFS from one year to the next should equal the increase or decrease of cash between the two consecutive balance sheets that apply to period that cash flow covers.

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SCOPE OF THE STUDY

This study is going to help, in identifying the causes of satisfaction or dissatisfaction regarding company financial activities. This study also describes certain factors that explain measures that how we can make financial system more effective. It is helpful in doing short term planning as it provides information regarding the sources and utilization of cash during a period, so it became easier for management to assess whether it will have adequate cash to meet day to day expenses and pay creditors in time. It is also useful in preparing cash budget for the future period as it informs the management about surplus or deficit periods of cash. So it is helpful in planning the investment of surplus cash in short term investments and to plan short term credit in advance for deficit periods. This study is also helpful in knowing trends and speed at which the current assets and current liabilities are being paid. It also reveals how the company take help of cash flow statement to ascertain the position of cash generated from operating activities which can be used for payment of dividend.

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OBJECTIVE OF THE STUDY “To analyze the cash flow statement” in Indoasian Fusegear Ltd to study the deviation of cash from earning. ”

SUB OBJECTIVES OF THE STUDY •

Cash flow statement analysis is useful for company short term financial planning

•

Useful in preparing the cash budget

•

Another objective of analysis of cash flow statement is comparison with the cash budget

•

To study the trend of cash receipts and payments

•

To explains the deviations of cash from earnings

•

To know the cash flow from various activities separately

•

To raise the funds in a manner that the cost of capital is minimum

•

To ensure flexibility in capital structure so that changes in the sources of funds may be made according to the changing situation

•

To ensure sufficient liquidity of funds

•

Suggesting the new ways and new techniques which can be introduced to the existing financial system, to improve its effectiveness and usefulness.

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RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY Research simply means ‘search for knowledge’. According to Rodman and Mory, research is ‘systemized effort to gain new knowledge’. Some people consider research as a movement from known to unknown; it is actually a voyage of discovery. According to Clifford Woody, research includes defining and redefining problem, formulating hypothesis or the suggested solutions, collecting organizing and evaluating data, reaching conclusions and at last carefully testing the conclusions to determine whether they fit to the formulated hypothesis or not. Research methodology has many dimensions, it includes not only the research methods but also consists the logic behind the methods used in the context of the study and explains why only a particular method of technique had been used so that search lend themselves to proper evaluation. Thus in a way it is a written game plan for concluding research.The term research refers to search of something new that can solve a problem. Research must have a specific objective which is called research problem. On the basis of the problem, researcher sets hypothesis. The goal of the research process is to produce new knowledge, which takes three main forms: •

Exploratory research:- which structures and identifies new problems

•

Constructive research:- which develops solutions to a problem

•

Empirical research:- which tests the feasibility of a solution using empirical evidence

•

Casual research:- which is related to day to day problems or for casual proble

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RESEARCH DESIGN

The research design used here is Exploratory Research Design .I have to study the Cash flow statement .So I need to enquire about financial activities and cash involved in them. So availability of cash flows is collected by people related with company financial sector and based on the reports I have to explore the factors that really help me in analysis of cash flow statement.. Since the major emphasis was on the discovery of ideas and insights into the facts, the research design most appropriate must be flexible enough to permit the consideration of many different aspects of a phenomenon. The methods used in context of this research design are: (1) The survey of concerning literature, (2) Experience Survey. The important features of this research design are listed as follows:  The sampling design used is Non-Probability Sampling design and it is flexible in nature.  There is a no pre-planned design for the analysis.  There is structured instrument for the collection of the data i.e. company cash flow statement  No fixed decisions about the operational procedures.

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SAMPLING DESIGN 1.

Sampling Unit It defines the unit of target population that will be sampled i.e. it answers who is to be surveyed. Sampling unit in my study will be individual employees of Vijaya Dairy who are indulging in making financial activities.

2.

Sampling Techniques This refers to the procedure by which the respondents should be chosen. In this study, Non Probability sampling of the following type is used:•

Convenience sampling

Sample Size It indicates the number of people to be surveyed. Through large sample give more reliable results than small samples but due to constraints of time and money the sample size was restricted to few respondents.

Area of Study Though other methods are important, but this method is given prime significance in modern research because of its extensive use to study the relationship of different factors, attitudes and practices of society and to explore the problems that cannot be treated by experiment methods.

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SOURCES OF DATA COLLECTION:

The data can be collected from secondary sources. The basic premises of my study are supplemented with the secondary data.

1. Primary Data

♣ Personal Investigation ♣ Observation Method ♣ Information from correspondents ♣ Information from superiors of the organization 2. Secondary Data

♣ Unpublished Sources such as Company Internal reports prepare by them given to their analyst & trainees for investigation.

♣ Websites like Vijaya Dairy official site, some other sites are also searched to find data.

ANALYSIS AND REPORTING THE FINDINGS

 Compilation of data through statement  Presentation of findings  Suggestions and conclusions

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CHAPTER-3 INDUSTRY PROFILE

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DAIRY INDUSTRY IN INDIA

The dairy industry in India is going through major changes with the liberalization policies of the government and restructuring of the economy. These have brought greater participation of the private sector. This is also consistent with global trend which could hopefully lead greater integration at Indian dairying with the world market for milk and milk product. After stagnating to 80 million tones for 20 years between 1950 and 1970 Indian milk production began to rise. Crossing 30 million tons in 1980 and 59 million tones in 1992.Today India ranks as the world second largest milk producer after the U.S.

DAIRY INDUSTRY IN ANDHRA PRADESH The main occupation of Andhra Pradesh is Cultivation. The village reflects the Social, Economic, Moral and Culture of Human Race. Dairy Stands as the Backbone of Agriculture at the same time it place important activity for stability of Rural Economic Conditions and helps to maintain Nations health by supplying sweet milk. It provides not only income but also income to the Milk producers. Now the productions of milk become a subsidiary occupation among marginal farmers, small farmers and Agricultural labor. The programme of Dairy Industry was matted with commendable help of the United Nations International children’s Emergency fund, Food and Agricultural Organizations and freedom from Hunge co-campaign organizations of U.K. these Organizations lit of this establishment of dairy units at Hyderabad and Vijayawada 15

in 1969 respectively which lead to pioneer Dairy development program in Andhra Pradesh. Later to set cooling and chilling centers have been set up to feed these two gigantic units. The Government of Andhra Pradesh has started Dairy Development Corporation to safe guard the interests of milk producers And ensuring supply of fresh milk at reasonable price to urban consumers as an our come A.P.D.D.C provided employment to nearly 20 employees and organize as many as 87 dairy units including 7 milk factories, 13 district dairies, 22 chilling centers, 24 mini chilling centered, 18 cooling centers, and 15 mini cooling centers. In addition to that the private units are contributing Their little mite in their development of the dairy industry. M/S Hindustan Milk Foods that have started a malted milk products Factory at Rajamundry. Further to enhance working efficiency and to increase turnover, the Government an autonomous dairy Collection development corporation. As a result of these measures the dairy industry improving towards massive milk collection. The will go along way in improving the supplement income to them. Further lucrative market for all the milk at the door steps of milk producers in a village at fair rate based on the two access policy is assured it could handle all the milk with its network of chilling and cooling centers. More than 3.5 Laksh milk producers get 20 crores per anum for supplying of the milk, which 69% of total beneficiaries belong to small and marginal farmers, Agricultural laborers and other weaker sections of the society. All the efforts by A.P.D.D.C. and N.D.D.B. today Andhra has excellent potential for milk production with progressive farmers. Who are more receipts to the new technology and scientific practices, the estimate milk production is 40 Lakhs per day.

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DAIRY SCENARIO: Milk is an important nutritious food. It is more important to infants and old people. Large number of people depends upon milk as an important source of nourishment. India with its vast population gives sentimental attachment to milk as a good food. Milk is substance with 1.029 to 1.035 specific Gravity and contains fat minerals proteins and vitamins. The government of India encouraged co-operative societies for production of milk and its products and setting up process of large milk units. India is today second largest producer of the milk in the world. Second only is the U.S.A contributing 11% of the world market. The production of milk in India is 577 Lakes of tones per year. It may be seen that the milk procurement by the organized sector is presently a fraction of the total milk available. There is sufficient scope for procurement of milk and for the growth of the milk sector. With high quality technology and expertise available indigenously and with the milk and milk product s order announce by the government enabling the private sector to deal directly with farmer. Organized handling of milk would lead to proper procurement measures. Which would in turn be beneficial to farmers? Remunerative price to farmers would lead to better care of cattle and there by set in motion a healthy cycle of increased availability of good milk. WORLD FOCUS ON INDIAN DAIRY Indian dairying is emerging as a Sunrise Industry India represents one of the worlds largest and fastest growing markets for milk the 250 million strong classes.

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Two main reasons for the world focus on India are one, the low cost economy: and two the liberalization process initiated since 1991. Other important factors include: Iowa inflation rate, inexpensive labor the presence of the world’s third largest pool of technical man power, the world’s largest democracy. Efforts to increase milk product by dairy farmers are strongly influenced by the degree to which demand signals are transmitted through the marketing system. Cooperative has played an important role in transmitting the message of urban market demand to them.

COMPETITIVE ADVANTAGES OF INDIAN DAIRY In the emerging liberalized global scenario, trade distorting agriculture policies has been the focus of the GATT multilateral trade negotiation. With the liberalization of agricultural trade under the new GATT regime, the heavy subsides prevalent in the dairy sector in the countries of the European Union as well as in the US will have to be brought down in the next few years .The competitive advantage of the Indians dairy industry are then considered to be substantial. With the substantial and continued investment in building up milk production. Indian can emerge as a major exporter of dairy products, at least by the early part of the next century , even through an prospects, at least by the early part of the next century, even though an prospects may meet with considerable opposition form the advanced dairy nation and this opposition is likely to focus significantly on quality issues. It is therefore necessary to evolve a long – term dairy industry policy that will not sustain but also enhance production and productive levels. This would require ensuring remunerative and increased returns. To the farmer while ensuring supply of increased fluid milk needs of the urban population at reasonable prices.

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COMPANY PROFILE

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COMPANY PROFILES As the years ed, APDDCF built up the infrastructure needed to meet every requirement of dairying, the procurement of milk from over 8,00,000 dairy farmers spread across Andhra Pradesh. Or getting it ready for nationwide distribution. It all happened with in the vast Dairy plant network of APDDCF through extensive use of high technology and management acumen honed to steer such a widespread operation and brought prosperity to the state many times. The federation has drawn up

more comprehensive system for procurement and

processing of milk. A dedicated research cell is actively pursuing way and means of bettering quality. Collaboration with global experts is also being sought, all in the attempt to remain at the forefront of modern dairying in India where QUALITY will be the watch world.

REACHING OUT OF THE WORLD APDDCF began its exports efforts thirteen years ago and has gained significant ground abroad. It has spread its marketing network in the Gulf and is exploring the possibility of exporting diary products like Butter, Ghee, Spread, UHT Milk; Sterilized cream etc., to other countries the federation has been meeting the tastes of divergent cultures, while bringing back the pleasure of home to Non-resident India. Today, APDDCF is in process of acquiring capabilities to the big league in diary technology from U.S.A, U.K, Australia, New Zealand and the Netherlands.

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VIJAYA DIARY AT A GLANCE Name of the Organization

: Vijaya Diary Limited

Nature of the business

:

Liquid Milk, Ghee, Butter milk

Basic raw material

:

Milk

Procuring the raw material

:

Co-operative Milk Society Boots.

Year of establishment

:

1969

Plant Location

:

Venkateswara puram, Nellore.

Plant Capacity(per day)

:

75000 Liters

Promoters

:

AP Milk Co-Operative Society, Hyd.

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DIARY DEVELOPMENT ACTIVITIES IN NELLORE DISTRICT During the year 1969, the Nellore dairy was started with initial capacity Of 12,000 liters per day mostly to collect milk from surrounding villages. After wares due to increase in procurement the handling capacity was expanded to 40,000 liters per day during the year 1979. The Milk Chilling Centers at Kavali was started during the year 1977 with an initial capacity of 6,000 liters per day. Similarly the Milk Chilling center at Venakatgiri was started during the year 1981 with the same capacity. During the year 1985, due to increase in Milk procurement in the district the handling of Milk chilling center Kavali and Venkatagiri has been increased from 6,000 liters to 12,000 liters per day. In the year 1986, the Nellore Milk Union was ed under AP Co. OP Societies Act 1964. Due to further increase in the Milk procurement the present handling capacity of Nellore Diary is expanded to 40,000 its to 75,000 its per day and Milk Chilling Center Kavali also expanded from 12,000 its to 20,000 its per day under O.F.III Programmed in 1993. Another Milk Chilling Center in the district at Dutttalur with handling capacity of 10,000 it’s per day was started in month of October 1995 and subsequently expanded 20,000 its per day during the year 1998. At present there are nearly 57,360 milk producers supplying milk to Nellore Union out of which there are small farmers 23,960 marginal farmers 8,300. Among these milk producers there are Schedule Caste 8,152, Schedule Tribes 697, Backward Class 11,612 and the remaining Other Castes are supplying milk to these Unions and they are being benefited financially by sales of milk by and amount of Rs.210 Lakhs is being paid the Milk Producers per month.

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The data related to the above development of Nellore Diary has been shown following table.

TABLE 1.1 PERFORMANCE OF DAIRY IN NELLORE (DIST)

NAME OF THE UNIT

CAPACITY PER DAY

PRESENT PER DAY

PEAK ON ANY DAY OF THE YEAR

Nellore Dairy

75,000 Liters

36,000 Liters

43,000 Liters

Kavali Dairy

30,000 Liters

12,000 Liters

17,000 Liters

Venkatagiri Dairy

12,000 Liters

12,000 Liters

12,000 Liters

Duttalur Dairy

22,000 Liters

22,000 Liters

22,000 Liters

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BRIEF NOTE OF MARKETING DIVISION

The Andhra Pradesh Dairy Development Federation has got 6 product – manufacturing units in Andhra Pradesh namely a. Milk Products Factory, Hyderabad. b. Milk Products Factory, Chittore. c. Milk Products Factory, Nandyal. d. Milk Products Factory, Proddutoor. e. Sangam Dairy Products Factory, Vadlamudi. f. Milk Products, Vijayawada. g. The products manufactured by these units are being sold under brand name of “VIJAYA”. The products generally produced for the National Market are: 1.

Skim Milk Powder.

2.

White Milk Powder.

3.

Vijaya Spray.

4.

Table Butter.

5.

Cheese.

6.

Ghee and White Butter. 24

SPEACILITIES OF VIJAYA DAIRY 1. Only milk producing company which exports its products to Malaysia.

2. Only Dairy offering five varieties of milk for the benefit of the consumers.

3. A Wide range of milk produced under “VIJAYA DAIRY”

4. Range of UHT processed milk and milk products with shelf life of 4 months.

5. A large Distribution Network.

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BY-PRODUCTS: In addition to milk the following by-products are also being Manufactured and marketed by the dairy. •

Butter milk

•

Basundhi

•

Curd

•

Sweet Lassie

•

Flavored Milk

•

Paneer

•

Cooking butter

•

Doodh Peda

•

Milk Cake

•

Ghee

•

Skim milk powder Strict quality controls are adopted before releasing the product to the market.

The brand name is well established and is known for its quality.

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FINANCIAL : The dairy is established with the financial assistance from Andhra Pradesh State Financial Corporation and the equity capital raised from the shareholders.

EXPANSION PROPOSALS: 1. New Milk Cooling Centers are Doravarisatram and Nellorepalem: The MCC Venkatagiri has been located at South West Corner, with respect to Milk procurement areas. As a result almost all the routs vehicles were to run idle from Gudur to Venkatagiri about 40 Kms. As a result the quality of Milk is getting deteriorated apart from the abnormal transport cost, moreover certain Mandals like Naidpet, Sullurpet, Tada and Pellakur are not covered, where there is good Milk Potentiality. In view of the above, one Bulk Cooling center of 5000 Lts. Per day capacity is established at D.V.Satram and is functioning from 21.4.2000. Similarly one more Bulk cooling center was established at Nellorepalem and it is functioning from 14.6.03. 2. Bulk cooling center at Adurpalli, Seethaamapuram and Rapur:

Similarly three more Bulk Cooling Centers of 5000 Lts per day capacity are proposed one each at Adurupalli, Seethamapuram and Rapur with an

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estimated cost of Rs.23.00 Lakhs each to cover more number of remote villages.

CHAPTER-4

CONCEPT OF CASH FLOW ANALYSIS

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CONCEPT OF CASH FLOW ANALYSIS INTRODUCTION TO CASH FLOW STATEMENTS Cash flow is essentially the movement of money into and out of your business; it's the cycle of cash inflows and cash outflows that determine your business' solvency. Cash flow analysis is the study of the cycle of your business' cash inflows and outflows, with the purpose of maintaining an adequate cash flow for your business, and to provide the basis for cash flow management. Cash flow analysis involves examining the components of your business that affect cash flow, such as s receivable, inventory, s payable, and credit . By performing a cash flow analysis on these separate components, you'll be able to more easily identify cash flow problems and find ways to improve your cash flow. Cash-flow in financial analysis means net income or profit obtained after adding back expense items which currently do not use cash such as depreciation. It may also exclude revenue items, which do not currently provide funds. It comes in two varieties — gross and net. Depreciation is not a tangible expense which is paid for by drawing a cheque but is a sum set aside each year, whether there is profit or not, for the replacement of an asset when it is worn-out. Such sums of money can be used to buy new plant or they can be kept in a bank, invested in gilt-edged securities or used in any way that the directors may choose. They, in fact form part of the “cash-flow” which is the amount retained in the business after paying off all expenses including taxes and dividends. 29

Gross cash-flow is the net profit after tax plus the provision for depreciation. Net cash-flow is obtained from the gross figure by deducting the amount distributed as dividend on preference and ordinary shares. Of the two, net cash-flow is the more important and commonly used because it represents the actual amount of cash retained in the business after all outgoings including dividends. It is frequently assumed that there will always be a cash-flow at least equal to the provision for depreciation or other adjustments not involving cash. This will be true only if the total revenue (sales and other income) for a period fully covers all of the expenses including depreciation and other write-offs. If the operations for a period result in a loss and if the loss exceeds the “non-cash” adjustments, the cash-flow will be negative instead of being positive. CONCEPT OF CASH FLOW STATEMENT Cash Flow Statement Cash flow statement may provide considerable information about what is really happening in a business beyond that contained in either the income statement or the balance sheet. Analyzing this statement should not present an intimidating task; instead it will quickly become obvious that the benefits of understanding the sources and uses of a company’s cash far outweigh the costs of undertaking some very straightforward analyses. Format of the Cash Flow Statement • The cash flow statement is divided into three sections: o Cash flow from operating activities: shows the results of cash inflows and outflows related to the fundamental operations of the basic line or lines of business in which the company engages. (Example: cash receipts from the sale of goods or services and cash outflows for purchasing inventory and paying rent and taxes.)

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o Cash flow from investing activities: associated with purchases and sales of non-current assets (Example: building and equipment purchases or sales of investments or subsidiaries.) o Cash flow from financing activities: associated with financing the firm (Example: selling and paying off bonds and issuing stock and paying dividends) • Exceptions o Short-term marketable securities are treated as long-term investments and appear in cash flow from investing activities o Short-term debt is treated as long-term debt and appears in cash flow from financing activities o Although dividends are handled as a cash outflow in the cash flow from financing activities section, interest payments are considered an operating outflow, despite the fact that both are payments to outsiders for using their money. BENEFITS OF THE CONCEPT Critics point out that the term cash-flow, meaning net profit inclusive of the provision for depreciation and similar non-cash transactions, is a misnomer since it implies that because of the write-back of expense items like depreciation which do not currently use cash, additional cash has flown into the business when nothing of the sort has really happened. All that has been achieved by adding back to the net profit the provision for depreciation and other non-cash transactions is to put on a cash basis the annual s originally written on the accrual basis.

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The critics, nevertheless, it that cash-flow is a valid analytical tool which, when correctly used, helps explain: 1. How companies are able to finance large-scale expansion or modernization, or repay heavy borrowings without resorting to fresh equity financing, and 2. Reconcile the difference in the net profit of companies operating within the same industry and otherwise comparable on the basis of their capitalizations, product-mix, and over-all management policies. The revenue earned by a company from its operations appears on its profit and loss for the year as “Sales and Other Income”. After deducting from this the expenses of the business including depreciation and income tax, there is left a balance commonly termed the net profit (or loss) for the year. But, unlike the out of pocket expenses like raw material costs, salaries, wages, etcetera, depreciation and similar provisions do not represent current outlays of cash. To arrive at the true spending power generated through operation it is necessary to add back to the net profit the items which do not constitute either a source or a disposition of cash such as depreciation which is one of the heaviest “expense” items listed on the profit and loss . PREPARATION AND PRESENTATION OF CASH FLOW STATEMENT The presentation of cash flow statement is carried out in two alternative formats that are either through direct method or indirect method. The difference in these two methods lies in their presentation of ‘Cash flows from operating activities’. In the direct method, operating cash receipts and payments are reported directly. In the indirect method, cash

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flows from operating activities are reported by way of adjustments of the reporting period’s net profit reported in the profit and loss .

Definitions: The following are used in this statement with the meanings specified: Cash comprises cash on hand and demand deposits with banks. Cash equivalents

are short term, highly liquid investments that are readily convertible

into known amounts of cash and which are subject to an insignificant risk of changes in value. Cash flows are inflows and outflows of cash and cash equivalents. Operating activities are the principal revenue-producing activities of the enterprise and other activities that are not investing or financing activities. Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Financing activities are activities that result in changes in the size and composition of the owner’s capital and borrowings of the enterprise. Cash and Cash equivalents: Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. For an investment to qualify as a cash equivalent, it must be readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value. Therefore, an investment normally qualifies as a cash equivalent only when it has a short maturity of, say, three months or less from the

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date of acquisition. Investments in shares are excluded from cash equivalents unless they are, in substance, cash equivalents; for example, preference shares of a company acquired shortly before their specified redemption date. Cash flows exclude movements between items that constitute cash or cash equivalents because these components are part of the cash management of an enterprise rather than part of its operating, investing and financing activities. Cash management includes in investment of excess cash in cash equivalents. Presentation of a Cash Flow Statement The cash flow statement should report cash flows during the period classified by operating, investing and financing activities. An enterprise presents its cash flows from operating, investing and financing activities in a manner which is most appropriate to its business.Classification by activity provides information that allows s to assess the impact of those activities on the financial position of the enterprise and the amount of its cash and cash equivalents. This information may also be used to evaluate the relationships among those activities. A single transaction may include cash flows that are classified differently. For example, when the instalment paid in respect of a fixed asset acquired on deferred payment basis includes both interest and loan, the interest element is classified under financing activities and the loan element is classified under investing activities. 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

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new investments without recourse to external sources of financing. Information about the specific components of historical operating cash flows is useful, in conjunction with other information, in forecasting future operating cash flows. Cash flows from operating activities are primarily derived from the principal revenueproducing 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: (a) Cash receipts from the sale of goods and the rendering of services; (b) Cash receipts from royalties, fees, commissions and other revenue; (c) Cash payments to suppliers for goods and services; (d) Cash payments to and on behalf of employees; (e) Cash receipts and cash payments of an insurance enterprise for s and claims, annuities and other policy benefits; (f) Cash payments or refunds of income taxes unless they can be specifically identified with financing and investing activities; and (g) Cash receipts and payments relating to futures 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 from the purchase 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.

35

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: (a) Cash payments to acquire fixed assets (including intangibles). These payments include those relating to capitalized research and development costs and self-constructed fixed assets; (b) Cash receipts from disposal of fixed assets (including intangibles); Cash Flow Statements (c) cash payments to acquire shares, warrants or debt instruments of other enterprises and interests in t ventures (other than payments for those instruments considered to be cash equivalents and those held for dealing or trading purposes); (d) cash receipts from disposal of shares, warrants or debt instruments of other enterprises and interests in t ventures (other than receipts from those instruments considered to be cash equivalents and those held for dealing or trading purposes); (e) Cash advances and loans made to third parties (other than advances and loans made by a financial enterprise); (f) Cash receipts from the repayment of advances and loans made to third parties (other than advances and loans of a financial enterprise); (g) cash payments for futures contracts, forward contracts, option contracts and swap contracts except when the contracts are held for dealing or trading purposes, or the payments are classified as financing activities; and (h) Cash receipts from futures contracts, forward contracts, option contracts and swap contracts except when the contracts are held for dealing or trading purposes, or the receipts are classified as financing activities.

36

When a contract is ed for as a hedge of an identifiable position, the cash flows of the contract are classified in the same manner as the cash flows of the position being hedged. Financing Activities The separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash flows by providers of funds (both capital and borrowings) to the enterprise. Examples of cash flows arising from financing activities are: (a) Cash proceeds from issuing shares or other similar instruments; (b) Cash proceeds from issuing debentures, loans, notes, bonds, and other short or longterm borrowings; and (c) Cash repayments of amounts borrowed. REPRTING OF CASH FLOWS Reporting Cash Flows from Operating Activities An enterprise should report cash flows from operating activities using either: (a) The direct method, whereby major classes of gross cash receipts and gross cash payments are disclosed; or (b) the indirect method, whereby net profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows.

The direct method provides information which may be useful in estimating future cash flows and which is not available under the indirect method and is, therefore, considered

37

more appropriate than the indirect method. Under the direct method, information about major classes of gross cash receipts and gross cash payments may be obtained either: (a) From the ing records of the enterprise; or (b) By adjusting sales, cost of sales (interest and similar income and interest expense and similar charges for a financial enterprise) and other items in the statement of profit and loss for: i) changes during the period in inventories and operating receivables and payables; ii) Other non-cash items; and iii) Other items for which the cash effects are investing or financing cash flows. Under the indirect method, the net cash flow from operating activities is determined by adjusting net profit or loss for the effects of: (a)

Changes during the period in inventories and operating receivables and payables;

(b)

Non-cash items such as depreciation, provisions, deferred taxes and unrealized

foreign exchange gains and losses; and

(c) All other items for which the cash effects are investing or financing cash flows. Alternatively, the net cash flow from operating activities may be presented under the indirect method by showing the operating revenues and expenses excluding non-cash items disclosed in the statement of profit and loss and the changes during the period in inventories and operating receivables and Payables. Reporting Cash Flows from Investing and Financing Activities An enterprise should report separately major classes of gross cash receipts and gross cash payments arising from investing and financing activities, except to the extent that cash flows described in paragraphs 22 and 24 are reported on a net basis.

38

Reporting Cash Flows on a Net Basis 22. Cash flows arising from the following operating, investing or financing activities may be reported on a net basis: (a) Cash receipts and payments on behalf of customers when the cash flows reflect the activities of the customer rather than those of the enterprise; and (b) Cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short. 23. Examples of cash receipts and payments referred to in paragraph 22(a) are: (a) The acceptance and repayment of demand deposits by a bank; (b) Funds held for customers by an investment enterprise; and (c) Rents collected on behalf of, and paid over to, the owners of properties. Examples of cash receipts and payments referred to in paragraph 22(b) are advances made for, and the repayments of: (a) Principal amounts relating to credit card customers; (b) The purchase and sale of investments; and (c) Other short-term borrowings, for example, those which have a maturity period of three months or less. 24. Cash flows arising from each of the following activities of a financial enterprise may be reported on a net basis: (a) Cash receipts and payments for the acceptance and repayment of deposits with a fixed maturity date; (b) The placement of deposits with and withdrawal of deposits from other financial enterprises; and (c) Cash advances and loans made to customers and the repayment of those advances and loans.

39

Extraordinary Items The cash flows associated with extraordinary items should be classified as arising from operating, investing or financing activities as appropriate and separately disclosed. The cash flows associated with extraordinary items are disclosed separately as arising from operating, investing or financing activities in the cash flow statement, to enable s to understand their nature and effect on the present and future cash flows of the enterprise. These disclosures are in addition to the separate disclosures of the nature and amount of extraordinary items required by ing Standard (AS) 5, Net Profit or Loss for the Period, Prior Period Items and Changes in ing Policies. Interest and Dividends Cash flows from interest and dividends received and paid should each be disclosed separately. Cash flows arising from interest paid and interest and dividends received in the case of a financial enterprise should be classified as cash flows arising from operating activities. In the case of other enterprises, cash flows arising from interest paid should be Classified as cash flows from financing activities while interest and dividends received should be classified as cash flows from investing activities. Dividends paid should be classified as cash flows from financing activities. The total amount of interest paid during the period is disclosed in the cash flow statement whether it has been recognized as an expense in the statement of profit and loss or capitalized in accordance with ing Standard (AS) 10, ing for Fixed Assets.

40

Interest paid and interest and dividends received are usually classified as operating cash flows for a financial enterprise. However, there is no consensus on the classification of these cash flows for other enterprises. Some argue that interest paid and interest and dividends received may be classified as operating cash flows because they enter into the determination of net profit or loss. However, it is more appropriate that interest paid and interest and dividends received are classified as financing cash flows and investing cash flows respectively, because they are cost of obtaining financial resources or returns on investments. Some argue that dividends paid may be classified as a component of cash flows from operating activities in order to assist s to determine the ability of an enterprise to pay dividends out of operating cash flows. However, it is considered more appropriate that dividends paid should be classified as cash flows from financing activities because they are cost of obtaining financial resources.

Taxes on Income Cash flows arising from taxes on income should be separately disclosed and should be classified as cash flows from operating activities unless they can be specifically identified with financing and investing activities. Taxes on income arise on transactions that give rise to cash flows that are classified as operating, investing or financing activities in a cash flow statement. While tax expense may be readily identifiable with investing or financing activities, the related tax cash flows are often impracticable to identify and may arise in a different period from the cash flows of the underlying transactions. Therefore, taxes paid are usually classified as cash flows from operating activities. However, when it is practicable to identify the tax cash flow with an individual transaction that gives rise to cash flows that are classified as investing or financing activities, the tax cash flow is classified as an investing or

41

financing activity as appropriate. When tax cash 5 Pursuant to the issuance of AS 16, Borrowing Costs, which came into effect in respect of ing periods commencing on or after 1-4-2000, ing for borrowing costs is governed by AS 16 from that date. Investments in Subsidiaries, Associates and t Ventures When ing for an investment in an associate or a subsidiary or a t venture, an investor restricts its reporting in the cash flow statement to the cash flows between itself and the investee/t venture, for example, cash flows relating to dividends and advances. Acquisitions and Disposals of Subsidiaries and Other Business Units The aggregate cash flows arising from acquisitions and from disposals of subsidiaries or other business units should be presented separately and classified as investing activities. An enterprise should disclose, in aggregate, in respect of both acquisition and disposal of subsidiaries or other business units during the period each of the following: (a) The total purchase or disposal consideration; and (b) The portion of the purchase or disposal consideration discharged by means of cash and cash equivalents. The separate presentation of the cash flow effects of acquisitions and disposals of subsidiaries and other business units as single line items helps to distinguish those cash flows from other cash flows. The cash flow effects of disposals are not deducted from those of acquisitions. Non-cash Transactions Investing and financing transactions that do not require the use of cash or cash equivalents should be excluded from a cash flow statement. Such transactions should be disclosed elsewhere in the financial statements in a way that provides all the relevant information about these investing and financing activities.

42

Many investing and financing activities do not have a direct impact on current cash flows although they do affect the capital and asset structure of an enterprise. The exclusion of non-cash transactions from the cash flow statement is consistent with the objective of a cash flow statement as these items do not involve cash flows in the current period. Examples of non-cash transactions are: (a) The acquisition of assets by assuming directly related liabilities; (b) The acquisition of an enterprise by means of issue of shares; and (c) The conversion of debt to equity. Components of Cash and Cash Equivalents An enterprise should disclose the components of cash and cash equivalents and should present a reconciliation of the amounts in its cash flow statement with the equivalent items reported in the balance sheet. In view of the variety of cash management practices, an enterprise discloses the policy which it adopts in determining the composition of cash and cash equivalents. The effect of any change in the policy for determining components of cash and cash equivalents is reported in accordance with ing Standard (AS) 5, Net Profit or Loss for the Period, Prior Period Items and Changes in ing Policies. Other Disclosures An enterprise should disclose, together with a commentary by management, the amount of significant cash and cash equivalent balances held by the enterprise that are not available for use by it. There are various circumstances in which cash and cash equivalent balances held by an enterprise are not available for use by it. Examples include cash and cash equivalent balances held by a branch of the enterprise that operates in a country where exchange controls or other legal restrictions apply as a result of which the balances are not available for use by the enterprise.

43

Additional information may be relevant to s in understanding the financial position and liquidity of an enterprise. Disclosure of this information, together with a commentary by management, is encouraged and may include: (a) The amount of undrawn borrowing facilities that may be available for future operating activities and to settle capital commitments, indicating any restrictions on the use of these facilities; and (b) The aggregate amount of cash flows that represent increases in operating capacity separately from those cash flows that are required to maintain operating capacity. The separate disclosure of cash flows that represent increases in operating capacity and cash flows that are required to maintain operating capacity is useful in enabling the to determine whether the enterprise is investing adequately in the maintenance of its operating capacity. An enterprise that does not invest adequately in the maintenance of its operating capacity may be prejudicing future profitability for the sake of current liquidity and distributions to owners.

44

CHAPTER-5 CASH FLOW SATATEMENT ANALYSIS

45

VIJAYA DAIRY CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2008. AS AT 31-MAR-2008 PARTICULARS A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit (Loss)before tax and Extra extraordinary items Adjustments for: Depreciation Misc. Expenditure Written off Profit on Sale of Fixed Assets Other Income Interest Received on FD Operating Profit (Loss) before working capital changes

3,213,455

23,518,270 1,450 (156,195) (138,959) (417,537) 26,020,484

Adjustments for: Trade and other receivables Inventories Trade Payables Cash generated from operations Taxes Paid CASH FLOW BEFORE EXTRAORDINARY ITEMS Extraordinary items (Pro. Written back) Net Cash From Operating Activities B CASH FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Purchase Investment Other Income Net cash used in investing activities

5,368,905 (598,394) 35,504,470 66,295,465

66,295,465

66,295,465

(23,335,949)

1,101,770 (22,234,179)

46

VIJAYA DAIRY CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2008. PARTICULARS Increase in Share Capital Proceeds from Long term barrowings Repayment of finance/lease liabilities Repayment of Unsecured Loans

AS AT 31-MAR-2008 (5,112,701) -

NET CASH USED IN FINANCING ACTIVITIES

(5,112,701)

Net increase in cash and cash equivalents Cash and Cash equivalents as at 01-04-2003

38,948,585 31,899,521

Cash and Cash equivalents as at 01-04-2004

70,848,106

(Closing balance)

47

Cash Inflow For the Year 2007-08 Particulars Amount 26,020,48 Operating profit 4 Decrease in Trade & Other 5,368,90 receivables 5 33,127,25 Trade Payables 0 1,101,77 Other Income 0

Amount in Rs.

Cash Inflow For the Year 2007-08 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 Operating profit

Decrease in Trade & Other receivables

Trade Payables

Other Income

Items

During the year cash inflows are operating profit Rs.2,60,20,484/-, decrease in trade recievables Rs.53,68,905/-, increase in trade payables Rs.3.31,27,250/-.

48

Cash Outflow For the Year 2007-08 Particulars Amount Inventories 598,394 Purchase of Fixed Assets 23,335,949 Long term borrowings 5,112,701

Cash Outflow For the Year 2007-08

Amount in Rs.

25000000 20000000 15000000 10000000 5000000 0 Inventories

Purchase of Fixed Assets

Long term borrowings

Items

During the year cash outflows are increase in Inventories Rs.5,98,394/-, purchase of Fixed assets Rs.2,33,35,949/- and decrease in Long term Borrowings Rs.51,12,701/Interpretation: During the year 2007-08 Major cash inflows are operating profit, Decrease in Trade and other receivables and increase in Trade Payables. Major cash outflows are Purchase of Fixed assets and Repayment long term Loans.

49

VIJAYA DAIRY CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2009. AS AT 31-MAR-2008 PARTICULARS A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit (Loss)before tax and Extra extraordinary items Adjustments for: Depreciation Misc. Expenditure Written off Profit on Sale of Fixed Assets Other Income Interest Received on FD Operating Profit (Loss) before working capital changes

4,274,123

20,643,420 1,450 (81,000) (96,497) (452,915) 24,288,581

Adjustments for: Trade and other receivables Inventories Trade Payables Cash generated from operations Taxes Paid CASH FLOW BEFORE EXTRAORDINARY ITEMS Extraordinary items (Pro. Written back) Net Cash From Operating Activities B CASH FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Purchase Investment Other Income Net cash used in investing activities

1,245,509 (2,529,376) (54,287,819) (31,283,105) (153,173)

(31,436,278)

(31,436,278)

(7,584,548) (58,580) 630,412 (7,012,716)

50

VIJAYA DAIRY CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2009. PARTICULARS Increase in Share Capital Proceeds from Long term barrowings Repayment of finance/lease liabilities Repayment of Unsecured Loans NET CASH USED IN FINANCING ACTIVITIES

AS AT 31-MAR-2008 25,000,000 (17,521,755) (7,000,000) 478,245

Net increase in cash and cash equivalents Cash and Cash equivalents as at 01-04-2004

(37,970,749) 70,848,106

Cash and Cash equivalents as at 01-04-2005

32,877,357

(Closing balance)

51

Cash Inflow For the Year 2008-09 Particulars Amount Operating Profit 24,288,581 Trade & Other receivables 1,245,509 Other Income 630,412 Increase in share capital 25,000,000

Amount in Rs.

Cash Inflow For the Year 2008-09 30000000 25000000 20000000 15000000 10000000 5000000 0 Operating Profit Trade & Other receivables

Other Income

Increase in share capital

Items

During the year cash inflows are operating profit Rs.2,42,88,581/-, decrease in Trade and other receivables Rs.12,45,509/- and Increase in share capital 2,50,00,000/-.

52

Cash Outflow For the Year 2008-09 Particulars Amount Inventories 2,529,376 Trade Payables 50,678,440 purchase of fixed assets 7,584,548 purchase of investments 58,580 Repayment of Finance 17,521,755 Repayment of Unsecured loans 7,000,000

Cash Outflow For the Year 2008-09

Amount in Rs.

60000000 50000000 40000000 30000000 20000000 10000000 0 Inventories

Trade

purchase of

purchase of

Repayment

Repayment

Payables

fixed assets

investments

of Finance

of Unsecured loans

Items

During the year cash outflows are increase in Inventory Rs.25,29,376/-, Decrease in Trade Payables Rs.5,06,78,440/-, purchase of Fixed assets Rs.75,84,548/-, repayment of loans Rs.1,75,21,755/-, and repayment Unsecured Loans Rs.70,00,000/-.

53

Interpretation: During the year 2008-09 Major cash inflows are Operating Profit and Increase in share capital. Major cash outflows are Decrease in current liabilities, Purchase of fixed assets and repayment of long-term loans and unsecured loans.

VIJAYA DAIRY CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2009. AS AT 31-MAR-2009 PARTICULARS A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit (Loss)before tax and Extra extraordinary items Adjustments for: Depreciation Misc. Expenditure Written off Profit on Sale of Fixed Assets Operating Profit (Loss) before working capital changes

30,282,394

13,246,222 1,450 1,798,976 45,329,042

Adjustmentsfor: Trade and other receivables Inventories Trade Payables & Provisions Cash generated from operations

CASH FLOW BEFORE EXTRAORDINARY ITEMS Extraordinary items (Pro. Written back) Net Cash From Operating Activities B CASH FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Investment in Subsidiaries Profit on Sale of Investments & Other Income Net cash used in investing activities

(39,862,080) (6,763,000) (7,093,419) (8,389,457)

(8,389,457)

(8,389,457)

(31,260,897) 7,318,835 (23,000,000) 723,352 (46,218,710)

54

VIJAYA DAIRY CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2009. PARTICULARS Increase in Share Capital Proceeds from Long term barrowings Repayment of finance/lease liabilities NET CASH USED IN FINANCING ACTIVITIES Net increase in cash and cash equivalents

AS AT 31-MAR-2009 57,300,000 22,048,597 (17,560,144) 61,788,453 7,180,286

Cash and Cash equivalents as at 01-04-2005

32,877,357

Cash and Cash equivalents as at 01-04-2006

40,057,643

(Closing balance)

55

Cash Inflow For the Year 2008-09 Particulars Amount 45,329,0 Operating profit 42 7,318,8 Sale of Fixed Assets 35 profit on sale of investments & Other 723,3 Income 52 57,300,0 Increase in Share Capital 00 22,048,5 Secured loans 97

Amount in Rs.

Cash Inflow For the Year 2008-09 70000000 60000000 50000000 40000000 30000000 20000000 10000000 0 Operating profit

Sale of Fixed Assets

profit on sale of investments & Other Income

Increse in Share Capital

Secured loans

Items

During the year cash inflows are operating profit Rs.4,53,29,042/-, sale of fixed assets Rs. 73,18,835/-, Increase in share capital Rs.5,70,00,000/-, and increase in long term borrowings Rs.2,20,48,597/-.

56

Cash Outflow For the Year 2008-09 Particulars Amount Trade & Other Receivables 39,862,080 Inventories 6,763,000 Trade Payables & Provisions 7,093,419 Purchase of Fixed assets 31,260,897 Investment on subsidiaries 23,000,000 Repayment of Liabilities 17,560,144

Cash Outflow For the Year 2008-09 45000000

Amount in Rs.

40000000 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 Trade & Other Receivables

Inventories

Trade Payables & Provisions

Purchace of Fixedassets

Investment on subsidaries

Repayment of Liabilities

Items

During the year cash outflows are Increase in Trade & other receivables Rs.3,98,62,080/-, Increase in Inventories Rs. 67,63,000/-, decrease in Trade Payables Rs.70,93,419/-, purchase of fixed assets 3,12,60,897/-, Investment in Subsidiaries (Navabarat Fertilizers Limited) Rs.2,30,00,000 and Repayment of loans 1,75,60,144 /-. Interpretation: During the year 2008-09 Major cash inflows are Operating profit, Increase in share capital and Proceeds from Long term Loans. Major Cash outflows are 57

Increase in current assets, Purchase of fixed assets, Investments in Subsidiaries and repayment of loans.

VIJAYA DAIRY CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2010. AS AT 31-MAR-2010 PARTICULARS A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit (Loss)before tax and 74,531,667 Extra extraordinary items Adjustments for: Depreciation Misc. Expenditure Written off Profit on Sale of Fixed Assets Profit on Sale of Investment Interest Received Other income Operating Profit (Loss) before working capital changes

14,302,432 1,450 (65,897) (7,625,356) (346,360) (42,000) 80,755,936

Adjustments for: Trade and other receivables Inventories Trade Payables & Provisions Cash generated from operations CASH FLOW BEFORE EXTRAORDINARY ITEMS Extraordinary items (Pro. Written back) Net Cash From Operating Activities B CASH FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Investment in Subsidiaries Profit on Sale of Investments & Other Income Net cash used in investing activities

(60,665,419) (46,632,986) (2,125,289) (28,667,758)

(28,667,758) (28,667,758)

(79,567,583) 13,029,407 (80,000,000) 8,013,716 (138,524,460)

58

VIJAYA DAIRY CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2010. PARTICULARS Increase in Share Capital Proceeds from Long term barrowings Repayment of finance/lease liabilities

AS AT 31-MAR-2010 69,293,720 71,883,646 (1,846,518)

NET CASH USED IN FINANCING ACTIVITIES

139,330,848

Net increase in cash and cash equivalents

(27,861,369)

Cash and Cash equivalents as at 01-04-2006 Cash and Cash equivalents as at 01-04-2007

40,057,643 12,196,274

(Closing balance)

59

Cash Inflow for the year 2009-10 Particulars operating profit Sale of Fixed Assets profit on sale of investments& other income Increase in Share Capital Long term borrowings

Amount 80,755,936 13,029,407 8,013,716 69,293,720 71,883,646

60

Cash Inflow For the year 2009-10 Amount in Rs.

90000000 80000000 70000000 60000000 50000000 40000000 30000000

Long term borrowings

0

operating profit

10000000

profit on sale of investments& other income

20000000

Items

During the year Cash inflows are Operating Profit Rs.8,07,55,936/-, Sale of Fixed assets Rs.1,30,29,407 /-, Profit on Sale of Investments

Rs.80,13,716/-, Increase in Share

Capital Rs.6,92,93,720/- and working Capital loans 7,18,83,646/-.

Cash Outflow For the year 2009-10 Particulars Amount Trade & Other receivables 60,665,419 Inventories 46,632,986 Trade payables & provisions 2,125,289 Purchase of fixed assets 79,567,583 Investments in Subsidiaries 80,000,000 Repayment of Finance 1,846,518

61

Cash Outflow For the Year 2009-10 90000000

Amount in Rs.

80000000 70000000 60000000 50000000 40000000 30000000 20000000 10000000 0 Trade &

Inventories

Trade

Purchase of

Other

payables &

fixed assets

receivables

provisions

Investments in

Repayment of Finance

Subsidaries Items

During the year Cash outflows are Increase in Trade receivables Rs.6,06,65,419/-, Increase

in

Inventories

Rs.7,95,67,583/,Investments

Rs.4,66,32,986/-, in subsidiaries

Purchase

(Navabarat

of

Fertilizers

fixed

assets

Limited)

Rs

8,00,00,000/-. Interpretation: During the year 2009-10 Major Cash inflows are Operating Profit, Sale of Fixed assets, Profit on sale of Investments, Increase in Share Capital and working capital loan. Major Cash outflows are Increase in Trade and other receivables, increase in Inventories, purchase of fixed assets, Investments in subsidiaries and Repayment Longterm loans VIJAYA DAIRY CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2011. PARTICULARS A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit (Loss)before tax and Extra extraordinary items Adjustments for: Depreciation Misc. Expenditure Written off

AS AT 31-MAR-2011 77,563,590

17,405,465 1,45 0

62

(4,632, ,005) 90,338,501

Profit on Sale of Fixed Assets Profit on Sale of Investment Interest Received Other income Operating Profit (Loss) before working capital changes Adjustments for: Trade and other receivables

29,788,823 (47,179,55 2) 1,511,055 (18,901,784) 74,458,827

Inventories Trade Payables & Provisions Cash generated from operations

-

CASH FLOW BEFORE EXTRAORDINARY ITEMS Extraordinary items (Pro. Written back) Net Cash From Operating Activities

74,458,827

B .CASH FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Investment in Subsidiaries Profit on Sale of Investments & Other Income

(68,052,94 7) 12,119,688 4,632,005

Net cash used in investing activities

23,157,573

VIJAYA DAIRY CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2011. PARTICULARS Increase in Share Capital Increased in Bank barrowings Loan from Directors

AS AT 31-MAR-2011 2,379,276 (16,800,000)

NET CASH USED IN FINANCING ACTIVITIES

8,736,849

Net increase in cash and cash equivalents

1,812,184

63

Cash and Cash equivalents as at 01-04-2007 Cash and Cash equivalents as at 01-04-2008

12,496,274 14,308,458

(Closing balance)

Cash Inflow for the year 2010-11 Particulars operating profit Sale of Fixed Assets profit on sale of investments& other income Bank borrowings

Amount 90,338,501 12,119,688 4,632,005 2,379,276

64

Cash inflow for the year 2010-11

During the year Cash inflows are Operating Profit Rs. 90,338,501/-, Sale of Fixed assets Rs. 12,119,688/-, Profit on Sale of Investments

Rs. 4,632,005/-, Decrease in Bank

borrowings 2,379,276/-.

Cash Outflow For the year 2010-11 Particulars Trade & Other receivables Inventories

Amount 29,788,823 47,179,552

65

Trade payables & provisions Purchase of fixed assets Sale of fixed asset

1,511,055 68,052,947 12,119,688

During the year Cash outflows are Increase in Trade receivables Rs.29,788,823/-, Increase in Inventories Rs. 47,179,552 /-, Purchase of fixed assets Rs. 68,052,947 /, Sale of fixed asset Rs 12,119,688 /-. Interpretation: During the year 2010-11 Major Cash inflows are Operating Profit, Sale of Fixed assets, Profit on sale of Investments, Decrease in Bank barrowings. Major Cash outflows are Increase in Trade and other receivables, Increase in Inventories and purchase of fixed assets, Decrease in Sale of fixed asset.

66

CHAPTER-6 FINDINGS

FINDINGS  Major Cash outflows are relating to acquisition of Fixed Assets.  The company has invested in it’s Subsidiary company Navabarat Fertilizers Limited Rs 10,30,00,000/- With 100% equity.

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 The Company is having Cash Credit limit With Yes Bank Limited Upto Rs. 7,50, 00,000 to meet its day to day cash requirements.  The company is having sustainable growth in Operating profit.  Major cash outflows are purchase of fixed assets and Investments in subsidiaries  Major Cash inflows are operating profit and increase in trade and other receivables.  During the five years non cash expenditure is Depreciation and Miscellaneous Expenses.  During the period the company has increased its share capital to Rs.13,29,00,000/ During the period the company has positive cash flows from operating activities  During the period the company has negative cash flows from investing activities by Purchase of fixed assets and investments  During the period the company has Positive cash flows from Financing activities by increase in Share capital and Working capital loans.  The company is having growth in its revenue sales revenue  During the period the company did not made any credit sales  Increase in Trade receivable in the year 2009-10 due to dues with customers  The company has taken hypothecation loans from different banks by hypothecation of vehicles.

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CHAPTER-7 SUGGESTIONS

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SUGGESTIONS  The management has to prepare cash budget periodically to know the requirement of the cash  The company can take working capital loans from banks.  The company can take Term loans from banks to acquire fixed assets and to expand the business.  The company has to increase revenue by increasing in sales.  The cash credit limit with Yes bank has to increase to expand the operations of the company.  Sometimes there are surplus funds. it is necessary to mobilize the funds into investing activiteies .  The management of the company has to prepare budgeted cash statements.  The company has to increase its cash flow from operating activities instead of increase in share capital.  The company has to increase in its investments.  The company has to prepare strategy for expanding the operations.

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BIBLOGRAPHY

PRASANNA CHANDRA

FINANCIAL MANAGEMENT Tata Mcgraw-hill Publicating Company Fifth Edition

I.M.PANDEY

FINANCIAL MANAGEMENT Himalaya Publications Eighth edition

M.Y.KAHAN&P.K.JAIN

FINANCIAL MANAGEMENT Tata Mcgraw-hill Publication Company Third Edition

R.K.SHARMA

FINANACIAL MANAGEMENT

SHASI K.GUPTHA

Kalyani publications First edition

Dr.S.N.MSHESHWARI

FINANACIAL MANAGEMENT Principals and practice Sulthan chand and sons Seventh edition

JOURNALS

FINANCIAL MANAGEMENT BUSINESS LINE BUSSINESS STANDARDS

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