Contents

1 Introduction .......................................................................................................................................... 3 1.1 1.2 1.3 1.4 2 STATEMENT OF THE PROBLEM ..................................................................................................... 4 TYPE OF RESEARCH ....................................................................................................................... 7 SOURCES ....................................................................................................................................... 7 SECONDARY DATA......................................................................................................................... 7

At Macro Level................................................................................................................................................... 8 2.1 INDUSTRY PROFILE ........................................................................................................................ 8

Company Profile .................................................................................................................................. 12 3.1 Infomedia 18 Limited - Related Companies: ............................................................................... 27

CONCEPTUAL FRAME WORK ............................................................................................................... 40 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 MEANING OF FINANCIAL STATEMENTS ...................................................................................... 40 CONCEPT OF FINANCIAL STATEMENTS&CASH MANAGEMENT.................................................. 40 GENERAL PRINCIPLES OF CASH MANAGEMENT: ........................................................................ 42 FUNCTION OF CASH MANAGEMENT: ......................................................................................... 45 MOTIVES OF HOLDING CASH: ..................................................................................................... 47 FINANCING OF CASH SHORTAGE AND COST OF RUNNING OUT OF CASH: ................................ 48 FINANCING CURRENT ASSETS: .................................................................................................... 50 RATIO ANALYSIS .......................................................................................................................... 58 ADVANTAGE OF RATIO ANALYSIS:- ............................................................................................. 58 LIMITATIONS OF ACCOUNTING RATIOS:- ................................................................................... 58 RATIOS USED ............................................................................................................................... 59 TECHNIQUES OF ANALYSIS AND INTERPRETATION .................................................................... 62

5 6 7

Survey.................................................................................................................................................. 62 RECOMMENDATIONS & CONCLUSION ............................................................................................... 78 BIBLIOGRAPHY .................................................................................................................................... 79 7.1 7.2 7.3 Network18 Media and Investments Limited: ........................................................................ 83 Network18 Media and Investments Limited: ........................................................................ 86 Television Eighteen India Limited: ......................................................................................... 88

NETWORK18 MEDIA & INVESTMENTS LIMITED(Group Holding Company) ............................................... 80

7.4 7.5 7.6 7.7

Television Eighteen India Limited: ......................................................................................... 90 Television Eighteen India Limited: ......................................................................................... 92 Television Eighteen India Limited: ......................................................................................... 93 Television Eighteen India Limited: ......................................................................................... 95

CHAPTER-I

1 Introduction
Financial Statements are the summarized statements of accounting data produced at the end of the accounting process by an enterprise through which it communicates accounting information to the external users. The external users can be investors, lenders, suppliers and trade creditors, customers, government and their agencies, public at large and employees. Analysis of Financial Statement is a systematic process of the critical examination of the financial information contained in the financial statements in order to understand and make decisions regarding the operations of the firm. Customarily, a set of financial statements include: (i) Balance Sheet (ii) Profit and Loss Account (iii) Schedules and notes forming part of the Balance Sheet and Profit & Loss Account

Cash is the most liquid asset, and also referred to as the life blood of a business enterprise is of vital importance to the daily operation of business firms. Its efficient management is crucial to the solvency of business because cash is the focal point of the fund flow in a business. Cash refers to the cash as well as bank balance of the company to the end of the accounting period, as reflected in the balance sheet of the company. While the profits reflects the earning capacity of the company and cash reflects its liquidity position.

Cash Flow is the movement of cash and its equivalents. It includes the inflow and the outflow of cash during a particular period. All transactions which lead to increase in cash and cash equivalents are classified as inflows of cash and all those transactions which lead to decrease in cash and cash equivalents are classified as outflows of cash. Cash Flow Statement is prepared with an objective to highlight the sources and uses of cash and cash equivalents for a period. Cash Flow Statement is classified under operating activities, investing activities and financing activities. The company Cash Management Services cover local and cross border Payments, Collections, Information Management, Account Services and Liquidity Management for both

corporate and institutional customers. With Infomedia18 India private limited, Cash Management services, investors always know their exact financial position. The Company has the flexibility to manage company's complete financial position directly from the company computer workstation. Customers will also be able to take advantage of our outstanding range of Payments, Collections, Liquidity and Investment Services and receive comprehensive reports detailing the transactions.

1.1 STATEMENT OF THE PROBLEM

Cash flow management is a broad term that refers to the collection, concentration, and disbursement of cash. The goal is to manage the cash balances of an enterprise/organization in such a way as to maximize the availability of cash not invested in fixed assets or inventories and to do so in such a way as to avoid the risk of insolvency. Factors monitored as a part of cash management include a companys level of liquidity, its management of cash balances, and its short-term investment strategies. The key to successful cash management, therefore, lies in tabulating realistic projections, monitoring collections and disbursements, establishing effective billing and collection measures, and adhering to budgetary restrictions.

Every organization needs strong internal control mechanisms such as authorization of access to assets and accounting records, regular independent verifications, a system of internal checks (segregation of duties), suitable documents to capture transactions, proper procedures for processing transactions, employment of honest and capable employees. Despite the fact that such control measures have been put in place by management, finances have continued being mismanaged in C&D. This is probably being caused by weak internal controls. E.g. staff colluding internally or with outsiders to circumvent the controls, internal controls covering only routine transactions, abuse of controls by those with authority. If this continues, it will lead to poor service delivery, donors refusing to fund C&D projects, and probably closure by government for failing to deliver to their expectation.

Internal controls therefore refer to the whole system of controls, financial and otherwise, established by the management to carry out the tasks of an organization in an orderly manner, ensuring adherence to organizations policies, safeguard its assets and secure as far as possible the accuracy and reliability of its records

a) OBJECTIVES OF THE STUDY The main objective of the study is to understand and ascertain the cash management. To assess the overall efficiency of the Network18 Media & Investments limited as a whole. To determine the financial strengths and weaknesses of the Network18 Media & Investments Limited by analyzing financial statements. To analyze the liquidity position of the company. Assess the effectiveness of internal controls in institute for international co-operation and development. To establish cash management policies used in institute for international co-operation and development. Establish the relationship between internal control systems and cash management policies in institute for international co-operation and development. To conclude and provide appropriate recommendations based on the study.

b) NEED OF THE STUDY

The evaluation study of Cash flow management is useful to know the performance of Network18 Media & Investments Limited and it helps the investors and the company managers to understand the company present situation. The performance of company however helps the prospective managers to improve the company.

c) SCOPE OF THE STUDY

The study is concentrated on financial analysis to evaluate the financial performance of the company. The evaluation of financial performance was for a period for 5 years i.e., 2007-08, 2008-09, 2009-10, 2010-11 and 2011-12. Necessary data were obtained from annual reports of the company.

d) LIMITATIONS OF THE STUDY 1. 2. 3. 4. The study period is restricted to 5 years, so it is possible to assess the firms financial position but past performance may not be a perfect indicator of future. Data for the study has been obtained from the profit & loss Accounts and Balance Sheets, Hence the study might have affected by Window Dressing of the accounts. The information used in the report is not full. Due to the provision of the disclosure of norms of the company. The study is based on secondary data and hence some of the information and its nonavailability also limited the scope of the study. e) RESEARCH DESIGN The study is partly descriptive and partly analytical. It is descriptive as it traces theoretical frame work of financial management. It is analytical in the sense that it makes an appraisal of the financial management in Network18 Media & Investments Limited.

1.2 TYPE OF RESEARCH

Descriptive research the study is primarily based on the internal records and the annual records of the company. Besides, information is gathered through discussion held with the officers of the company.

1.3 SOURCES
The primary data have to be collected with the help of informal discussion with Account officers.

1.4 SECONDARY DATA

Annual report of Network18 Media & Investments Limited. Informal discussion with account officers. Company website. Journals and magazines.

CHAPTER-II

2 At Macro Level
2.1 INDUSTRY PROFILE
Media penetration in India has seen enormous progress in the recent years with advancements in technology and coverage, catering to a wide range of media audience in terms of language, region, religion and content. A robust economic growth, growing literate population and consumer spending power have contributed to an expanding consumer base of various forms of mass media newspapers, radio and television. The new media such as the internet and mobile phones have also made significant inroads since the early 2000s

The Indian media and entertainment industry

The Indian media and entertainment industry includes print media, television, radio, cinema and the internet. According to the FICCI-KPMG Media and Entertainment Industry Report, 2009, revenues of the Indian media and entertainment industry in 2008 were Rs. 58, 40,000 lakhs, compared to Rs. 52, 00,000 lakhs in 2007 recording a growth of 12.4%. Over the next five years, the industry is projected to grow at a Compounded Annual Growth Rate (CAGR) of 12.5% to reach the size of Rs.1,05,20,000 lakhs by 2013.The growth in the entertainment industry has been aided by Indias rapid economic growth. Indias gross domestic product grew by 7.50%, 9.40%, 9.60% and 8.7% in Fiscal 2005, Fiscal 2006, Fiscal 2007 and Fiscal 2008 respectively (Source: Economic Survey of India 2008-09, Ministry ofFinance. Due to the growth in the Indian economy, the growing Indian middle class is able to allocate a higher percentage of its monthly expenditure on media and entertainment.In the last four years 20052008, the industry recorded a cumulative growth of 15% on an overall basis.

The Indian print media industry

Indian print media a readership base of over 2,500 lakhs, India is the second largest print market in the world. Revenues from the Indian print media industry have grown at a CAGR of 13.8% over last three years (2006-08). The newspaper segment has witnessed growth at a CAGR of 13.7% for the period 2006-08 and the magazine segment has witnessed growth at a CAGR of 15.4% for the same period. Further, growth in the newspapers and magazines segment for the period 2009-13 is estimated to be at a CAGR of 9.1% and 8.1%, respectively. (Source: FICCIKPMG Report 2009)

Revenues in the print media industry are primarily generated from subscription and advertising. Subscription revenues have grown at a CAGR of 10.5% for the period 2006-08 and advertisement revenues have grown at a CAGR of 16% over the same period. Growth in advertisement and subscription revenues for the period 2009-13 is estimated to be at a CAGR of 11% and 7.3% respectively (Source: FICCI-KPMG Report 2009). Advertising revenue is in general related to economic growth in the country, and subscription revenues is expected to grow Owing to structural growth drivers like rising penetration, higher literacy levels and improving affordability of the media. The newspaper segment has historically dominated the print segment in India. However, the sector has witnessed significant development in 2008, especially in the first half with the increase in the number of special interest publications (including B2B and B2C magazines), launch of niche newspaper supplements as well as aggressive portfolio and geographic expansion by different companies both in the national and regional space. These developments have benefitted consumers due to increased availability of choices and better product quality as well as the advertisers, providing them with the media to reach a broader target audience.

In addition to the special interest publications, the print media industry in India also includes publishing of directories (including yellow pages, exporters guides and

home/office/city guides), custom publishing and providing printing solutions. Printing solutions offered, range from designing, sourcing and procurement of raw materials, processing and printing, binding, warehousing and dispatch to customer designated locations. This service covers printing of newspapers, magazines, annual reports, books, product brochures and other publicity material. While, the growth of this segment is significantly related to the growth of the publishing segment in India, turnaround time, quantity and quality standards are critical to success in this industry.More recently, publishing outsourcing by foreign publishers has seen significant growth in India as a segment of the print media industry. India, being a low cost destination, is attractively placed to gain contract publishing projects both from domestic and foreign clients. Scientific, technological, medical, educational and legal publishing outsourcing projects to India from foreign clients amounted to US$ 4,400 lakhs in 2006. At an estimated growth rate of 35% per annum till 2010, the industry is estimated to reach US$ 14,600 lakhs by 2010.

Key Industry Players: InfomediaHurix Infomedia Infomedia GETIT Infomediary World Wide Media Lason India Indiacom Living Media Group MacMillan India Conde Nast India Integra Media TransasiaNewgen Publishing Jasubhai Group Tech Books Cyber Media Excel Soft Next Gen Publishing Scientific Publishing Services Nets

11

Chapter-III

3 Company Profile

Introduction

Infomedia18 is a diversified printing and publishing company with a leading market presence in business and consumer directories. The Indian Readership Survey, 2008 has rated the Infomedia Yellow Pages, with an average issue readership of approximately 94 lakhs, as having the highest readership among all the English publications in India. it believe we have a strong presence in the special interest publication segment in which we publish 17 special interest publications. it also provide printing solutions and have recently forayed into the publishing outsourcing business. As one of Indias few listed publishing companies, we have a pan -India market presence covering 25 cities across India.

It began publication of our Yellow Pages (subsequently renamed as Infomedia Yellow Pages) in 1989 in Ahmadabad and Rajkot. The Infomedia Yellow Pages provides information on a range of products and services ranging from manufacturing industries to retailer showrooms, on an annual basis. The Infomedia Yellow Pages are also available in the form of compact discs and can be accessed online through our website www.yellowpages.co.in. The Infomedia Yellow Pages has been conferred the Super brand status in 2006 and is now distributed in 21 cities across India. In addition to the Infomedia Yellow Pages, it also publish certain specific directories in the B2B and certain guides in the B2C. Infomedia is the largest publisher of business and consumer directories in India (Source- Indian Readership Survey, 2008), with an exhaustive database of over 5,00,000 businesses across 1,500 categories. In the B2B segment, our directories also include, among others, the Indian Exporters Guide and state industrial directories published across the seven states. In the B2C segment, we publish several consumer guides which include among others Know Your City and Infomedia HomeGuide.In June 2008 they acquired the Ask Me brand name with the intention to build a voice based and online directory service by leveraging our existing Infomedia Yellow Pages database. Additionally, in July 2008 we entered into a co-operation agreement with Alibaba.com, an international B2B

company to create an online community of Indian businesses and provide them with a single channel to promote their products and source from quality suppliers from India and around the world. Under the agreement we have been appointed as the sales promoter of Alibaba.com to promote its services. Further, in March 2009, we entered into a businesstransfer agreement with burrp!, pursuant to which we have acquired burrp!, which operates an online local information website (www.burrp.com), to develop our presence in the online directory and information services business. In 1997, we entered the special interest publication business with the launch of Better Photography, a special interest publication focused on providing information on photography.

Currently, we publish 17 special interest publications of which nine publications are classified in the B2B segment and eight are classified in the B2C segment, including three B2C special interest publications, Intelligent Computing-Chip, Disney AdventuresIndia and T3 (Tomorrows Technology Today), which they publish in association with Vogel Burda, Walt Disney Company Private Limited and Future Publishing Limited, respectively. Further, in November 2008, they received necessary regulatory approvals for the launch, in collaboration with an international publisher, for the Indian editions of a new special interest publication namely CIO Insight. Companyexpects to launch this special interest publication after finalization of relevant license agreements with the international partner.

In 2005, we entered into a joint venture with Reed Elsevier to incorporate Reed Infomedia. Pursuant to the shareholders agreement, Reed Infomedia has been granted the license to publish the Indian editions of certain international magazines of Reed Business Information (a division of Reed Elsevier) for a period of five years.The Company holds 49% of the shareholding of Reed Infomedia. Reed Infomedia currently publishes two special interest publications, JCK and Logistics Management. However, the shareholders agreement with Reed Elsevier was terminated pursuant to a termination agreement dated July 20, 2009. Under the termination agreement, our Company and Reed Elsevier have agreed to wind up and liquidate Reed Infomedia prior to December 31, 2009.

13

With over 50 years of experience in the printing business, we are commercial printers of magazines, annual reports, books, product brochures and publicity material. Our printing business provides a one-stop shop for content printing with the ability to handle all the requirements of processing, printing, binding and dispatch.Leveraging our market position in Indias publishing industry, company ventured into the publishing outsourcing business in December 2005, through our acquisition of Cepha Imaging in Bangalore. The company further, consolidated our presence in the publishing outsourcing business by acquiring the Glyph UK in the U.K and the International Typesetting and Composition, a publishing outsourcing business, operating through its two legal entities, Glyph US in the US and Glyph International in Noida, India.

Infomedia have in-house capabilities to meet the extensive requirements of all our printing and publishing businesses. The printing press at Nerul, Navi Mumbai is ISO 9002 certified and has an extensive range of machines that gives us the flexibility to serve all our business requirements along with the requirement of our customers.The Network18 group is one of India's leading media conglomerates with interests in television, internet, event management, films entertainment, mobile content and allied businesses.

Company Equity Shares were listed on the BSE in 1985. Subsequently, the Equity Shares of our Company were listed on the NSE.Company restated consolidated income for the Fiscals 2008, 2009 and three months ended June 30, 2009 were Rs.18,956.91 lakhs, Rs. 16,847.75 lakhs and Rs. 2,952.69 lakhs, respectively. it also incurred consolidated losses as restated of Rs. 464.54 lakhs, Rs. 10,015.77 lakhs and Rs. 784.34 lakhs in the Fiscals 2008, 2009 and the three month period ended June 30, 2009, respectively.

About Network18 Group:

One of the leading media conglomerates with businesses panning across business news, general news, general entertainment, home shopping, print, etc, Network18 group has had an extremely complicated group structure given the intergroup ownership. Existing structure of Network18 Group has 4 separately listed entities Network18 Media and Investments (the holding company), TV18 (business news and web business), IBN18 (general news and entertainment business) and Infomedia18 (Yellow Pages and Print businesses).The network 18 group is one of the advertising companies in India its deal with TV channel, internet, website, print publishing media. Its under this company.

1. CNBC TV18 2. CNBC AAWAJ 3. IBN 4. HOME SHOP18 5. WEB18 6. E 18 7. VIACOM 18 8. STUDIO 18 Proposed restructuring of the group structure: 1. 2. The business news broadcasting operations of TV18 (CNBC TV18 and CNBC Awaaz) wouldbe transferred to IBN18 All the other businesses and investments of TV18 Infomedia18, Web18, 21% stake inIBN18, Media Capital Venture (including stake in DEN Networks), would get transferred toNetwork18 3. IBN18 would be renamed as New TV18 and will house all the broadcast properties of the group including business news (CNBC TV18, CNBC Awaaz), general news (CNN IBN, IBN7 and 50% in IBN Lokmat) and general entertainment through 50% stake in Viacom18 (Colors, MTV, Vh1)

15

4.

The Yellow Pages and Print Magazine business of Infomedia18 would get transferred to Network18, while printing press operations would remain in the listed Infomedia18. The business under listed entity would be upfor sale

5. 6.

Viacom18 would likely buyout the 80% stake in The Indian Film Company, currently held by Network18 Any future ventures in broadcast space would form a part of IBN18, whereas other businesses like print would come under Network18

Strengths Infomedias believe that the following are our principal competitive strengths, which differentiate us from other Indian companies with similar business operations. Established and significant presence in the publishing sector; Strong Brand Recognition; Ability to successfully establish new businesses and ventures.

Established and significant presence in the publishing sector With an exhaustive database of over 5, 00,000 businesses across 1,500 categories. They began publication of our Yellow Pages in 1989 in Ahmadabad and Rajkot. The Infomedia Yellow Pages are now we are the largest publisher of business and consumer directories in India, (Source: Indian Readership Survey, 2008distributed in 21 cities across India. In addition to the Infomedia Yellow Pages, we also publish certain B2B directories and certain guides in the B2C segment. We currently publish 17 special interest publications, of which nine are classified in the B2B segment and eight are classified in the B2C segment.

Strong Brand Recognition It believe that we have been able to build a strong brand identity for our Infomedia Yellow Pages (subsequently renamed as Infomedia Yellow Pages) and several of our B2B and B2C special interest publications, such as Search, Overdrive and Better Interiors. Out of our 17 special interest publications some are in association with our international partners. These include Intelligent Computing-Chip, Disney Adventures India and T3 (Tomorrows Technology Today). They believe that our special interest publications have established a brand name associated with quality in a competitive market and in the recent years we have seen a substantial growth in their revenues and we believe that we will be able to retain and expand our brand identity in the special interest publishing business.

Niche editorial content Company special interest publications are led by distinguished editorial teams and are recognized for their superior editorial content. they strive to maintain strong journalistic integrity and high editorial standards through our editorial staff, which consisted of approximately 85 persons as on October 31, 2009. it believe that our editorial team has helped us expand our market share by providing relevant and informative content to our readers. With separate editorial teams that focus on publishing each special interest publication, company believes that 51 our special interest publications have been able to compete effectively by providing niche, pertinent and differentiated content.

17

Ability to successfully establish new businesses and ventures

The Company has in the past successfully conceptualized and established new businesses in niche spaces. Entered the special interest publication segment in 1997 with the launch of Better Photography. We now publish 17 special interest publications. Further, in 2005 we forayed into the publishing outsourcing business and we believe that we are in a position to successfully leverage our position in the publishing industry to consolidate and expand in the publishing outsourcing business. We believe that our ability to successfully establish new businesses, coupled with our position to leverage existing skills and synergies from the Network18 group, strengthens our ability to attract and retain leading industry talent and to successfully grow our business. Company Strategies To create synergies with the Network 18 group. To expand in the voice and online directory and information services segment by leveraging on our market position in the publishing business. To expand our existing strategic partnerships with our international partners and to enter into new strategic partnerships. To expand our printing facilities.

To create synergies with the Network18 group

Infomedia18 is a part of the Network18 group and we intend to leverage the existing relationship of the Network18group and its international partners to expand and grow our business. For instance, in January 2009, in association with us, TV18 launched Overdrive, a car and bike television show produced with the assistance and input of the Overdrive magazine editorial team. We also intend to leverage the agreements that TV18 has entered to with international partners to consolidate and develop our publishing business. We have recently entered into an agreement with Digital18 Media Limited, pursuant to which our Company has undertaken to carry out all the printing requirements of the business magazine Forbes India.

To expand in the voice and online directory and information services segment by leveraging on our market position in the publishing business Infomedia18 believe that our brand name is well recognized and associated with quality reliability and growth strategy involves expanding our product and service offerings, both organically and through acquisitions and strategic initiatives. it intend to consolidate our leadership position and build on our brand equity in the printing and publishing sector by establishing our presence on emerging distribution platforms in the print and publishing sectors such as the internet and voice telephony. Towards this end, we intend to acquire and invest in brands, assets or companies offering B2B or B2C voice based and online directory and information services whose operations, resources, capabilities and strategies are complementary to our operations. In this respect, we have entered into an agreement with Alibaba.com to create an online community of Indian businesses and provide them with a single channel to promote their products and source from quality suppliers from India and around the world..it have also acquired the Ask Me brand name, with the intention to build a voice platform by leveraging our existing Infomedia Yellow Pages data base.

To expand our existing strategic partnerships with our international partners and to enter into new strategic Partnerships Company intends to expand our publishing business in India by growing our existing strategic partnerships with various international publishing businesses. Our strategy involves building partnerships with key international publishers and taking advantage of operational efficiencies and resultant economies of scale. Further, we believe that our experience in the publishing business has uniquely positioned us to partner international publishers and offer them the cost advantage associated with India. Implementing this strategy, they have entered into license agreements (exclusive and non-exclusive license) with certain foreign special interest magazines to publish their Indian editions.. To expand our printing facilities While a significant portion of our current printing capacity is utilized in-house for the publication of our various titles, we intend to upgrade our existing printing facilities by acquiring modern equipment and spare parts. As part of our strategy to expand our printing business, our Company proposes to invest Rs. 385 lakhs from the Net Proceeds of this Issue towards

19

replacement of essential parts of the printing machines. We believe that this initiative would improve the productivity and increase the speed of operation of our printing press facility. Business segments-Publishing business Business Directories It is the largest publisher of business and consumer directories in India, with an exhaustive database of over 5,00,000 businesses across 1,500 categories. Our B2B directories are circulated among various small and medium enterprises, while our B2C directories are circulated among various households. It began publication of our Yellow Pages in 1989 in Ahmedabad and Rajkot. Infomedia Yellow Pages is a directory of businesses, published annually. The InfomediaYellow Pages are also available in the form of compact discs and can also be accessed online through our website www.yellowpages.co.in. We have entered into an agreement with Nokia Corporation in 2007 to provide our business directories services from its mobile phones for local searches for a period of two years. Further, we have also entered into an alliance agreement dated August 27, 2007 with Hawk Media LLC, which is engaged in the business of directories and other publications in the United Arab Emirates to facilitate cross selling of advertisements. All our B2B and B2C directories and guides are distributed free of cost and are published annually, except for the Know Your City which is published monthly. All our directories are printed at our printing press situated at Nerul, Navi Mumbai.

B2B Directories Infomedia Exporters Guide was launched in 1994. It provides information on international businesses to Indian manufacturers and service providers. It is available in print and in the form of compact discs. The directories and the compact discs are distributed to various Embassies and High Commissions, the International Chamber of Commerce and at various domestic and international trade fairs in India. It can also be accessed on the internet through the website www.indianexporters.com. B2C Directories Know Your City was launched as Info media City Guide in 2008. It focuses on providing information on the hotels, cafes and tourist sights. Know your City is distributed to all the major hotels, tourism offices in Mumbai, Delhi and Jaipur. B2B Special Interest Publication:

The following are the brief details of some of the B2B special interest publications: Search was launched in January 1998. Search is a monthly magazine and is industrial source book providing information on a large number of specialist industrial products. It also provides information on different and highly advanced manufacturing processes as well as on the industrial exhibitions held in the country. Modern Medicare was launched in December 2003. Modern Medicare is a monthly magazine and publishes information on the medical and healthcare industry with a focus on the latest developments in the healthcare equipment and technology. The magazine targets medical and healthcare industry professionals, nursing homes and hospitals Modern Machine Tools was launched in September 2003. Modern Machine Tools is a monthly magazine providing information on the latest trend and technologies and seeks to provide an insight into the machine tools and ancillary industries in India. The magazine is published in association with the Indian Machine Tools Manufacturers Association. The magazine targets exporters, industry professionals, research and development personnel and educational consultants. Auto Monitor was launched in January 2001.Auto Monitor is a fortnightly magazine and publishes information on commercial vehicles, auto components, roads and infrastructure as well as the government policies in India. The magazine targets senior professionals of the automotive industry, engineers, scientists and the research and development specialists In addition, we also publish other B2B special interest publications such as Modern Packaging and Design, Modern Food Processing and Modern Plastics and Polymers, Modern Pharmaceuticals and Chemical World.

B2C Special Interest Publications:

The following are the brief details of our B2C special interest publications: Overdrive was launched in September 1998. Overdrive is a monthly magazine and provides in-depth reviews of the latest vehicles along with posters and contests. The magazine targets auto enthusiasts and potential car buyers.

21

 Intelligent Computing Chip was launched in December 2003. It is published monthly and contains information of a diverse range of information ranging from hardware and software reviews, technology insights, workshops to featured articles and entertainment. The magazine targets users in the age group of 18 to 35 years. Better Interiors was launched in May 2005. It is a monthly magazine and publishes information on industry news and updates, product information and profiling, international perspectives in interior designs and profiles of architects. The magazine targets individuals as well as professional architects. T3 (Tomorrows Technology Today) was launched in December 2006. It is a monthly magazine providing information on a range of products ranging from MP3 players and sound systems to watches, sports equipment and cars. The magazine targets primarily young male readers. AV Max was launched in December 1999. It is published monthly and provides information on music, videos music gadgets and home theatres. Disney Adventures India was launched in December 2006.Disney Adventures India is a monthly entertainment and educational magazine that targets readers in the age group of seven to 14 years. Better Photography was launched in June 1997. It is a monthly magazine and publishes information on the various photography products, digital kiosks and reviews and critiques of the latest products. The magazine targets professional and amateur photographers. Intelligent Entrepreneur was launched in September 2009. It is published monthly and contains information on entrepreneurship, business management and potential business opportunities. The magazine targets existing and future entrepreneurs. Editorial Team: We have a specialized editorial team dedicated to the B2B special interest publications and a separate editorial team for each of the B2C special interest publications. For each of the B2C special interest publications, we recruit specialised journalists, who have a media and industry background. Our editorial team for each of the B2C special interest publications consists of highly skilled professionals with significant domain and technological expertise. Showrooms and professional services:

It is published from 18 major cities of India, reaching to 21,00,000 potential buyers. Indias largest business directory, the Infomedias Yellow Pages covers 18 prime cities

Ahmedabad Bangalore Bhubaneswar Chennai Coimbatore Delhi Hyderabad Indore Jaipur Kochi Kolkata Ludhiana Mumbai Nagpur Nasik Pune Surat Vadodara Vizag

They also have B2B and B2C books in following cities: Ahmedabad, Hyderabad, Mumbai and Pune.It is one of the best sources of information at the point of purchase throughout the year.Infomedia Yellow Pages is distributed free of cost in every mentioned city to business and corporate offices, industrial belts, residences, hotels, consulates, embassies etc. For more and indepth details on advertising, visit to our site www.yellowpages.co.in or contact any one of the nearest branches. They have also tied up with Google, Nokia and STAR India with a view to transcending media platforms and strengthening their position as a comprehensive directories and publishing solutions provider. 1955 The press was spun off separately and got incorporated as Tata Press Ltd.

23

1.

1984 The Tata Press Limited got listed on the Bombay Stock Exchange. Over the years, the company leveraged its strengths in printing to expand into value-added segments such as directory services, special interest publishing and direct marketing and ended up becoming the dominant player in each of these categories.

2. 3. 4.

1992 The stand-alone Yellow Pages, the Tata Press Yellow Pages were launched in Mumbai. Since then, numerous directories have been added to their portfolio. 1995 Tata Press Database Services was conceived as a Direct Marketing Division, which was eventually named as Direct Edge. 1997 Better Photography, Special Interest Magazine was launched. The subsequent years have witnessed a gamut of special interest magazines and business publications being launched.

5. 6.

2000 The company was renamed Tata Infomedia. 2003 The Tata Group exited Tata Infomedia, in order to focus better on its core businesses, and their share was bought by ICICI Venture, India's leading private equity player. Following this, the company was renamed Infomedia India Limited.

7.

2005 The Company entered into joint venture agreement with Reed Elsevier Overseas B. V., Netherlands, for the incorporation of Reed Infomedia India Private Limited. The Company forayed into the publishing outsourcing segment acquiring a majority stake in Cepha Imaging Private Limited.

8.

2006 The Company acquired Keyword Group. The Company acquired Software Services LC and American Devices India. The Company entered into a scheme of arrangement with its equity shareholders for the purchase of the equity shares of the Company from its existing shareholders. 2008 Television Eighteen India acquired control over the board of directors the Company.

9.

2009 Scheme of Arrangement for inter-alia merger of I-Ven Interactive with the Company, filed with the High Court of Judicature at Bombay.

Business highlights: Turnover: Rs 2.0 billion for 2006-07 Market leader in the Yellow Pages segment 20 established special interest titles Awards and achievements: Infomedia 18 Limited is a 1SO 9001:2000 certified for 'Provision of Printing Services'.

 The National Awards for Excellence in Printing proves that Infomedia 18 Limited is among the leading printers in India. 7 leading B2C titles: - Overdrive - Chip - Better Photography - Better Interiors - AV Max- T3Disney Adventures 12 landmark titles for B2B verticals: - Search- Photo imaging- Modern Textiles- Modern Plastics and Polymers - Modern Pharmaceuticals - Modern Packaging - Modern Medicare Modern Machine Tools - Modern Food Processing - Electrical and Electronics - Chemical World - Automonitor Clients: Leading Indian companies rely on Infomedia 18 Limited to produce and dispatch their annual reports. Here is a list of their prestigious clients: Multi-National Corporations:- Philips, Glaxo, Siemens, P & G and Ingersoll Rand Banking:- State Bank of India, EXIM Bank Groups:- A V Birla Group, Tata Group, M&M Group Others:- ACC, Onward Technology, HCC, Raymonds, Avaya Global, Akruti City, HDFC, ICICI Lombard, Mercator Lines, etc. Customers: McGraw-Hill, Thomson Learning, Wolters Kluwer, Pearson Education, Taylor and Francis, and the World Bank Management Mr. RaghavBahl is our founder and Managing Director. He has a Bachelors Degree in economics from St. Stephens College, University of Delhi and has a Masters Degree in Business Administration from the University of Delhi. He began his career as a management consultant with A. F. Ferguson & Company. He founded TV18 Group (now Network18 Group) in 1993 and has been instrumental in establishing partnerships with media conglomerates such as CNBC-AP, CNN, Viacom Inc., Time Warner, A&E Television Networks LLC and Forbes. Under his guidance, we now operate Indias leading English news channel, CNN IBN and the leading English and Hindi business news channels, CNBC TV18 and CNBC Awaaz. He has over 24 years experience in television and journalism. Mr. RaghavBahl was hailed as a Global Leader of Tomorrow by the World Economic Forum and was also selected by Ernst & Young as the Entrepreneur of the Year (2007) for Business Transformation. He has also won numerous

25

awards, including the Sanskriti award for Journalism in 1994. As Managing Director of the Company, Mr. RaghavBahl is responsible for the overall performance of the Company. Our Company holds strategic investments in various media companies and Mr. RaghavBahl has extensive experience in the media and entertainment sectors. He has been instrumental in establishing and operating TV18 Broadcast Limited (TV18 Broadcast), our subsidiary which operates well established channels viz. CNBC-TV18 CNBC Awaaz, CNN IBN and IBN7. During his association with Network18, Mr. Bahl has shown the highest levels of commitment and adherence to the highest standards of journalism. He leads by personal example and has assured success of the Company. Keeping in view of his contribution since his appointment, the Board considers his reappointment to be in the best interests of the Company. The Board is confident that Mr. RaghavBahls management capabilities will enable the Company to progress further. Chairperson : SanjeevManchanda

Managing Director: HareshChawla

Directors PrakashIyer,

HareshChawla,

JayaramanShashidhar,

ManojMohanka,

RaghavBahi,

RaghavBahl,

SaikuamrGanapathyBalasubramanian,

SaikumarGanapathyBalasubramanian, SanjeevManchanda, SenthilChengalvarayan, YugSamrat

Infomedia 18 Ltd Key Data:

Ticker: Exchanges:

509069 BOM

Country: Major Industry: Sub Industry:

INDIA Printing & Publishing Printers

2009 Sales Currency: Fiscal Yr Ends: Share Type:

1,607,906,092 (Year Ending Jan 2010). Indian Rupees March Ordinary

Employees: Market Cap: Shares Outstanding: Closely Held Shares:

1,100 694,674,422 23,913,061 20,095,647

3.1 Infomedia 18 Limited - Related Companies:

Infomedia 18 Limited (Parent). Yellow Pages Income Fund. Yellow Pages (Singapore) Ltd. The Southern Pages. The Boisenet. Yell Group plc. APN News and Media Limited. CBD Media LLC. PagesJaunesGroupe SA. L. M. Berry and Company.

Infomedia has also been awarded as superbrands

Product profile

Infomedia is one of India's leading media companies with businesses ranging from Business Directories to Magazine Publishing, Printing Services and Publishing Outsourcing.Infomedia also organizes large-scale business and special interest consumer events that leverage the strength of its magazine publishing business. Publishing outsourcing is another business division of Infomedia.

27

Products offered by Infomedia 18

I.E.G.

Indian Exporters Guide is specially developed to provide the international business community, access to the vast Indian market. It carries comprehensive information on Indian Manufacturers ready to service internationa l or Indian Exporters Guide reaches the desks of its users as & when they require it

C.I.D.

Construction and Interior Design (CID) Directory is an exhaustive compilation of professionals and suppliers of the construction and interior design industry. It is a directory of members of the Indian Institute of Architects, Indian Institute of Interior Designers, Practicing Engineers, Architects & Town Planners Association, Builders Association of India, and Indian Society of Structural Engineers. Every member gets a free copy of the issue. It also contains information on suppliers to the construction and interior design industry. Professionals in the industry use it a single reliable source of information for all their product and service needs.

I.S.D. Infomedia18 Limited, India's largest publisher of Yellow Pages, publishes Industries State Directory (ISD)-Maharashtra, Gujarat, Tamilnadu, Punjab and Andhra Pradesh. Similar directories for Karnataka, Madhya Pradesh and Eastern India will be available very soon. Infomedia Industries Directory - a robust tool that meticulously sums up the need for any Manufacturer and Trader across categories. Definitely beyond numbers, the directory lays out for you, glimpses of the economy for the state, critical features on policies, incentives, schemes, etc.

29

I.Y.P Ever come across anyone who hasnt heard of the Yellow Pages?, unlikely, InfomediaYellow Pages is the complete, user-friendly directory of all products and services, from manufacturers, industries to suppliers, dealers, retailers, showrooms and professional services. It is published from 18 major cities of India, reaching to 21, 00,000 potential buyers. Infomedia Yellow pages is the largest read English publication with a 1, 43, 02,000 refer ship, nationally. (Source: IRS 2005 R2). Apart from print, Infomedia Yellow Pages having presence in CD, the Internet and through a call centre.

I.O.G In this day and age, the office has evolved into a space that's bustling with activity, where important decisions are taken, tension, cheer, promotions and celebration all seem to be intrinsic to this environment between 9.00 am to 5.00pm. Workstations, computers, stationery and relevant items are a necessity in our daily office routine. Office Guide was introduced to meet these requirements. It lists information related to office products and services, is categorized and alphabetically arranged. It is a 4-colour guide that sports a vibrant layout that is packed with updated and accurate relevant information.

I.H.G Home Guide is an area specific guide that provides comprehensive information on products and services for home and everyday purposes. It is a powerful medium to promote your product/service and helps businesses to tap into the home consumer needs. It is a colorful and compact with easy to use alphabetical index. It lists emergency and useful information for quick access. It is published for 36 locations in Mumbai, Pune, Bangalore, Chennai and Kolkata.

31

SERVICE OFFERED BY INFOMEDIA18

Infomedia18 has launched AskMe.in. From what I understand, AskMe.in is an online business directory that is powered by two other products: YellowPages.co.in and Burrp.com (all owned by the same company).Another local search portal has joined the wagon Askme.in (beta version). This portal has been launched by Infomedia 18. Listings are distributed under 18 categories and 74 cities. Infomedia is calming to have more than 3 million business listings. Quick Look to: Features: Design: Neat and clear designed No ads on search result page (Surprised) Business listing page could be better Good use of Blue and yellow color

Click to Call Narrow Search Take business card on phone via SMS Share on FB, Twitter only Preview of ad on yellow pages, j Map based view Business Photo & Video upload Rate search results Listing Preference Info media listing first, rest comes afterwards.. Essential Numbers like Taxi, Ambulance, LPG etc(powered by burrp)

Askme.in is powered by Infomedia Yellow pages. Wonder if instead of developing a new portal they could have just redesigned their existing portal yellowpages.co.in and integrated Burrp.com with that.

Infomedia18 have some more important directories which shows here: Directories

Infomedia Yellow Pages

Infomedia Yellow Pages is the complete and comprehensive directory of all products and services, from Manufacturers, Industries to Suppliers, dealers, retailers, showrooms and professional services.

Infomedia Office Guide

It lists information related to office products and services, is categorized and alphabetically

33

arranged. It is a 4-colour guide that sports a vibrant layout that is packed with updated and accurate relevant information-all about the area near your office.

Infomedia Home Guide

It is an area-specific information guide aimed at providing comprehensive and useful information on products and services required for home and practical day-to-day purposes.

Infomedia Industries Directory

It is a robust tool that meticulously sums up the need for any Manufacturer and Trader across categories. Definitely beyond numbers, the directory lays out for you, glimpses of the economy for both states, critical features on policies, incentives, schemes, etc.

Indian Exporters Guide

The ultimate guide and sourcebook for international buyers for Indian manufacturers and service providers is undoubtedly, the Indian Exporters' Guide. It helps them execute their orders in a most professional manner by listing competent organizations that provide Support Services to this large and buoyant industry.

City Guide

It serves as the perfect introduction to the city. It contains comprehensive, easy-to-use information at your fingertips about hotels, places to eat, cafes, bars, entertainment centres and places of interest, as well as a whole bouquet of useful information specifically selected for leisure and business travellers to a city.

CID

Construction and Interior Design (CID) Directory is an exhaustive compilation of professionals and suppliers of the construction and interior design industry. It is a directory of members of the Indian Institute of Architects, Indian Institute of Interior Designers, Practicing Engineers, Architects & Town Planners Association, Builders Association of India, and Indian Society of Structural Engineers. Engineering Expo Engineering Expo is India's premier Industrial Trade Fair. Today it is among India's highest visitor turn-out events.The exhibition has been well supported by associations like AIAI (All India Associations of Industries, Indian Merchants Chambers, CICU (Chamber of Industrial and commercial Undertaking), REA (Rajkot Engineering Association) and held in association with 'The Economic Times' and 'Outlook Business' as the media partners and Approved by ITPO. Printing Solutions Infomedia 18 Limited is a 1SO 9001:2000 certified for "Provision of Printing Services". We are engaged in processing and printing to binding and dispatch. Infomedia 18 Limited specializes in Designing and Printing of Annual Reports, Magazines, Books, Product brochures, Publicity material, Diaries and Calendars.

35

Publishing: Business Publications The driving force and aim at Infomedia is to bring together buyers and sellers in key industry verticals through its 12 B2B titles. Each title is focused at a single vertical and it seeks to educate its stakeholders in these verticals through a well-structured mix of news and views, insightful and well-researched articles and relevant studies. Special Interest Publications What we have here are six magazines that reach out to the reader in a multi-dimensional fashion. Thats exactly what the consumer magazine division of Infomedia has managed to engineer and has thereby created diverse communities around fast-growing special interest areas. Infomediaconstantly seeks to meet the information and community needs of enthusiasts, hobbyists and specialists alike. Special Interest Publications What we have here are six magazines that reach out to the reader in a multi-dimensional fashion. Thats exactly what the consumer magazine division of Infomedia has managed to engineer and has thereby created diverse communities around fast-growing special interest areas. Infomedia constantly seeks to meet the information and community needs of enthusiasts, hobbyists and specialists. Overdrive

Every month, Overdrive provides the polish and grease from the world of automobiles. In-depth reviews of the latest vehicles. Tips on safe driving. Posters. Contests. Chip

Chip is an IT magazine that deals with all aspects of technology that touch the lives of end users. It is composed of a diverse range of compelling technology content including hardware and software reviews, technology insights, workshops, feature articles and entertainment

Better Photography

Better Photography is India's first magazine completely devoted to the art and photography. It is loaded with the latest views, interviews, critiques, contests. AVMAX,TheAudio-VideoMagazine

science of

AV MAX is a leading magazine providing audio-video content focused on the industry members, music enthusiasts and audiophiles alike. Established as the first magazine in India that provided the latest audio-video fodder to all, AV MAX has in its 10 years, grown into one of the most reliable and successful resources. Better Interiors

Better Interiors features home and work space dcor solutions that reflect the taste, moods, lifestyle and aspirations of people, architects' facts and profiles, industry news and updates, product information and profiling, international perspectives in interior designs. T3 - Tomorrow's Technology Today

T3 is the magazine that covers the hottest, best and the latest in the world of gadgets: from MP3 players and sound systems to watches, sports equipment and cars.

37

Entrepreneur

Entrepreneur, India's first magazine for entrepreneurs and small businesses just launched.

Publishing Outsourcing Infomedia 18 Ltd has acquired 100% stake in UK based Keyword Group Limited, a leading publishing BPO company and majority stake in Cepha Imaging Systems, a Bangalore based firm. Keyword has a relatively strong customer connect and Cepha enable Infomedia to consolidate its position in the booming outsourcing market in India. Infomedia now has a potent combination of a customer-facing front-end in Europe, and a world class facility in India. In April 2006, Infomedia acquired International Typesetting and Composition (ITC), operating through its two legal entities, a front-end called Software Services, LC, a limited liability company based in Florida, USA and back-end operations at American Devices India Private Limited, based out of Noida, India. American Devices India Private Limited is one of the leading providers of pre-press and publishing services catering primarily to the North American market. It is a fast-growing and innovative Noida-based company focused on providing top-ofthe-line services to blue chip companies. Key customers include McGraw-Hill, Cengage Learning, Kaplan Publishing, Taylor and Francis, Jones and Bartlett Publishing.

The publishing BPO business is clocking an annual growth of 30 per cent in India with profit margins which vary between 30-40 per cent. Indian publishing BPO industry is currently focusing on the US and UK markets. India with several advantages like trained professionals, proficiency in English and favourable time zone is expected to emerge as one of the main outsourcing centers for the developed world. Our experience in the Yellow Pages business and our familiarity with printing and publishing has uniquely positioned us to partner international publishers and offer them the India cost advantage. Our carefully drawn up strategy involves building partnerships with key international publishers and taking advantage of operational

efficiencies and resultant economies of scale. This will enable us to provide a clear cost advantage for our customers. Globally, the publishing industry has undergone a spate of mergers resulting in heavy consolidation and emergence of publishing giants like Reed Elsevier and others. These conglomerates are keen to outsource both low-end as well high-end publishing works to India. This vertical is expected to grow at a rapid pace in the coming years as there is a long list of satisfied clients from the US and UK.

39

CHAPTER-IV

4 CONCEPTUAL FRAME WORK

4.1 MEANING OF FINANCIAL STATEMENTS
A financial statement is an organized collection of data according and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm. It may show a position at moment of time as in the case of a balance sheet, or may reveal a series of activities over a period of time, as in the case of an income statement. Financial statements are used by the management as a basis for planning operations including procurement of adequate finance and as a means of exercising control over financial position of the business and efficient and profitable use of assets. They are summarized periodical reports of financial and operative data contained in the books of account, known as the general ledger.

4.2 CONCEPT OF FINANCIAL STATEMENTS&CASH MANAGEMENT

"Cash, like the blood stream in the human body, gives vitality and strength to business enterprises."1 Though cash hold the smallest portion of total current assets. However, "Cash is both the beginning and end of working capital cycle - cash, inventories, receivables and cash."2' it is the cash, which keeps the business going. Hence, every enterprise has to hold necessary cash for its existence." Moreover, "Steady and healthy circulation of cash throughout the entire business operations is the basis of business solvency." A Now-a-days non-availability and high cost of money have created a serious problem for industry. Nevertheless, cash like any other asset of a company is treated as a tool of profit." Further, "today the emphasis is on the right amount of cash, at the right time, at the right place and at the right cost."5 In the words of R.R. Bari, "Maintenance of surplus cash by a company unless there are special reasons for doing so, is regarded as a bad sigh of cash management."6 As, "holding of cash balance has an implicit cost in the form of its opportunity cost."7

Cash may be interpreted under two concepts. In narrow sense, "Cash is very important business asset, but although coin and paper currency can be inspected and handled, the major part of the cash of most enterprises is in the form of bank checking accounts, which represent claims to money rather than tangible property." 6 While in broader sense, "Cash consists of legal tender, cheques, bank drafts, money orders and demand deposits in banks. In general, nothing should be considered unrestricted cash unless it is available to the management for disbursement of any nature." 9Thus, from the above quotations we may conclude that in narrow sense cash means cash in hand and at bank but in wider sense, it is the deposit in banks, currency, cheques, bank draft etc. in addition to cash in hand and at bank. "Cash management includes management of marketable securities also, because in modern terminology money comprises marketable securities and actual cash in hand or in bank." "The concept of cash management is not new and it has acquired a greater significance in the modern world of business due to change that took place in the conduct of business and ever increasing difficulties and the cost of borrowing." Apart from the fact that it is the most liquid current assets, cash is the common denominator to which all current assets can be reduced because the other current assets i.e. receivables and inventory get eventually converted into cash. This underlines the significance of cash management. The term cash management refers to the management of cash resource in such a way that generally accepted business objectives could be achieved. In this context, the objectives of a firm can be unified as bringing about consistency between maximum possible profitability and liquidity of a firm. Cash management may be defined as the ability of a management in recognizing the problems related with cash which may come across in future course of action, finding appropriate solution to curb such problems if they arise, and finally delegating these solutions to the competent authority for carrying them out The choice between liquidity and ij profitability creates a state of confusion. It is cash management that can provide solution to this dilemma. Cash management may be regarded as an art that assists in establishing equilibrium between liquidity and profitability to ensure undisturbed functioning of a firm towards attaining its li business objectives.

41

Cash itself is not capable of generating any sort of income on its own. It rather is the prime requirement of income generating sources and functions. Thus, a firm should go for minimum possible balance of cash, yet maintaining its adequacy for the obvious reason of firm's solvency. Cash management deals with maintaining sufficient quantity of cash in such a way that the quantity denotes the lowest adequate cash figure to meet business obligations. Cash management involves managing cash flows (into and out of the firm), within the firm and the cash balances held by a concern at a point of time. The words, 'managing cash and the cash balances' as specified above does not mean optimization of cash and near cash items but also point towards providing a protective shield to the business obligations. "Cash management is concerned with minimizing unproductive cash balances, investing temporarily excess cash advantageously and to make the best possible arrangement for meeting planned and unexpected demands on the firms' cash."

4.3 GENERAL PRINCIPLES OF CASH MANAGEMENT:

Harry Gross has suggested certain general principles of cash management that, essentially add efficiency to cash management. These principles reflecting cause and effect relationship having universal applications give a scientific outlook to the subject of cash management. While, the application of these principles in accordance with the changing conditions and business environment requiring high degree of skill and tact which places cash management in the category of art. Thus, we can say that cash management like any other subject of management is both science and art for it has well-established principles capable of being skillfully modified as per the requirements. The principles of management are follows as; 1. Determinable Variations of Cash Needs A reasonable portion of funds, in the form of cash is required to be kept aside to overcome the period anticipated as the period of cash deficit. This period may either be short and temporary or last for a longer duration of time. Normal and regular payment cf cash leads to small reductions in the cash balance at periodic intervals. Making this payment to different employees on different days of a week can equalize these reductions. Another technique for balancing the level of cash is to schedule i cash disbursements to creditors during that period when accounts receivables collected amounts to a large sum but without putting the goodwill at stake.

2. Contingency Cash Requirement There may arise certain instances, which fall beyond the forecast of the management. These constitute unforeseen calamities, which are too difficult to be provided for in the normal course of the business. Such contingencies always demand for special cash requirements that was not estimated and provided for in the cash budget. Rejections of wholesale product, large amount of bad debts, strikes, lockouts etc. are a few among these contingencies. Only a prior experience and investigation of other similar companies prove helpful as a customary practice. A practical procedure is to protect the business from such calamities like bad-debt losses, fire etc. by way of insurance coverage.

3. Availability of External Cash Another factor that is of great importance to the cash management is the availability of funds from outside sources. There resources aid in providing credit facility to the firm, which materialized the firm's objectives of holding minimum cash balance. As such if a firm succeeds in acquiring sufficient funds from external sources like banks or private financers, shareholders, government agencies etc., the need for maintaining cash reserves diminishes. 4. Maximizing Cash Receipts Every financial manager aims at making the best possible use of cash receipts. Again,cash receipts if tackled prudently results in minimizing cash requirements of a concern. For this purpose, the comparative cost of granting cash discount to customer and the policy of charging interest expense for borrowing must be evaluated on continuous basis to determine the futility of either of the alternative or both of them during that particular period for maximizing cash receipts. Yet, the under mentioned techniques proved helpful in this context (A) Concentration Banking: Under this system, a company establishes banking

centers for collection of cash in different areas. Thereby, the company instructs its customers of adjoining areas to send their payments to those centers. The collection amount is then deposited with the local bank by these centers as early as possible. Whereby, the collected funds are transferred to the company's central bank accounts operated by the head office.

43

(B)

Local Box System: Under this system, a company rents out the local post offices

boxes of different cities and the customers are asked to \ forward their remittances to it. These remittances are picked by the authorized lock bank from these boxes to be transferred to the company's central bank operated by the head office. (C) Reviewing Credit Procedures: It aids in determining the impact of slow payers

and bad-debtors on cash. The accounts of slow paying customers should be reviewed to determine the volume of cash tied up. Besides this, evaluation of credit policy must also be conducted for introducing essential amendments. As a matter of fact, too strict a credit policy involves rejections of sales. Thus, curtailing the cash inflow. On the other hand, too lenient, a credit policy would increase the number of slow payments and bad debts again decreasing the cash inflows. (D) Minimizing Credit Period: Shortening the terms allowed to the customers would

definitely accelerate the cash inflow side-by-side revising the discount ofered would prevent the customers from using the credit for financing their own operations profitably. (E) Others: Introducing various procedures for special handling of large to very large

remittances or foreign remittances such as, persona! pick up of large sum of cash using airmail, special delivery and similar techniques to accelerate such collections. 5. Minimizing Cash Disbursements The motive of minimizing cash payments is the ultimate benefit derived from maximizing cash receipts. Cash disbursement can be brought under control by preventing fraudulent practices, serving time draft to creditors of large sum, making staggered payments to creditors and for payrolls etc. 6. Maximizing Cash Utilization Although a surplus of cash is a luxury, yet money is costly. Moreover, proper and optimum utilization of cash always makes way for achievement of the motive of maximizing cash receipts and minimizing cash payments. At times, a concern finds itself with funds in excess of its requirement, which lay idle without bringing any return to it. At the same time, the concern finds it unwise to dispose it, as the concern shall soon need it. In such conditions, efforts should be made in investing these funds in some interest bearing securities. There are certain basic

strategies suggested by Gitman, which prove evidently helpful in managing cash if employed by the cash management. They are: "Pay accounts payables as late as possible without damaging the firm's credit rating, but take advantage of the favorable cash discount, if any. Turnover, the inventories as quickly as possible, avoiding stock outs that might result in shutting down the productions line or loss of sales.Collect accounts receivables as early as possible without losing future loss sales because of high-pressure collections techniques. Cash discounts, if they are economically justifiable, may be used to accomplish this objective."

4.4 FUNCTION OF CASH MANAGEMENT:

"Cash management is concerned with minimizing unproductive cash balances, investing temporarily excess cash advantageously and to make the best possible arrangements for meeting planned and unexpected demands on the firm's cash."15 Cash Management must aim to reduce the required level of cash but minimize the risk of being unable to discharge claims against the company as they arise. All these aims and motives of cash management largely depend upon the efficient and effective functioning of cash management. Cash management functions can be studied under five heads, namely, cash planning, managing cash flow, controlling cash flow, optimizing the cash level and investing idle cash. All these functions are discussed below in details: 1. Cash Planning Good planning is the very foundation of attaining success. For any managementdecision, planning is the foremost requirement. "Planning is basically an intellectual process, a predisposition to do things in an orderly way, to think before acting and to act in the light of facts rather than of a guess." Cash planning is a technique, which comprises of planning for and controlling of cash. It is a management process of forecasting the future need of cash, its available resources and various uses for a specified period. Cash planning, thus, deals at length with formulation of necessary cash policies and procedures in order to carry on business continuously and on sound lines. Good cash planning aims at providing cash, not only for regular but also for irregular and abnormal requirements.

45

2. Managing Cash Flows The heading simply suggests an idea of managing properly the flow of cash coming inside the business i.e. cash inflow and cash moving out of the business i.e. cash outflow. These two are said to be properly managed only, if a firm succeeds in accelerating the rate of cash inflow together with minimizing the cash outflow. As observed expediting collections, avoiding unnecessary inventories, improving control over payments etc. contribute to better management of cash. Whereby, a business can conserve cash and thereof would require lesser cash balance for its operations. 3. Controlling the Cash Flows As forecasting is not an exact science because it is based on certain

assumptions.Therefore, cash planning will inevitably be at variance with the results actually obtained. For this reason, control becomes an unavoidable function of cash management. Moreover, cash controlling becomes essential as it increases the availability of usable cash from within | the enterprise. As it is obvious that greater the speed of cash flow cycle, I greater would be the number of times a firm can convert its goods and ' services into cash and so lesser will be the cash requirement to finance the desired volume of business during that period. Furthermore, every enterprise is in possession of some hidden cash, which if traced out substantially decreases the cash requirement of the enterprise. 4. Optimizing the Cash Level A financial manager should concentrate on maintaining sound liquidity position i.e.cash level. All his efforts relating to planning, managing and controlling cash should be diverted towards maintaining an optimum level of cash. The foremost need of maintaining optimum level of cash is to meet the necessary requirements and to settle the obligations well in time. Optimization of cash level may be related to establishing equilibrium between risk and the related profit expected to be earned by the company. 5. Investing Idle Cash Idle cash or surplus cash refers to the excess of cash inflows over cash outflows,which do not have any specific operations or any other purpose to solve currently. Generally, a firm is required to hold cash for meeting working needs facing contingencies and to maintain as well as develop goodwill of bankers.The problem of investing this excess amount of cash arises simply because it contributes nothing towards profitability of the firm as idle cash precisely earns no

returns. Further permanent disposal of such cash is not possible, as the concern may again need this cash after a short while. But, if such cash is deposited with the bank, it definitely would earn a nominal rate of interest paid by the bank. A much better returns than the bank interest can be expected if a company deploys idle cash in marketable securities. There are yet another group of enterprise that neither invest in marketable securities nor willing to get interest instead do they prefer to deposit excess cash for improving relations with banks by helping them in meeting bank requirements for compensating balances for services and loans. 4.5 MOTIVES OF HOLDING CASH: Every business transaction whether carried on credit or on cash basis ultimatelyresults in

either cash inflow or cash outflows. The pivotal point in present day financial management is to maximize cash generation and to minimize cash outflows in relation to thecash inflows. Keynes postulated three motives for holding cash:1. 2. 3. Transaction Motive, Precautionary Motive, and Speculative Motive.

To which one more motive for holding cash has been added:4. Compensation Motive

1. Transaction Motive It refers to holding of cash for meeting routine cash requirements and

financingtransactions carried on by the business in the normal course of action. This motive requires cash for payment of various obligations like purchase of raw materials, the payment of usage and salaries, dividend, income tax, various other operating expenses etc. However, there exists regular and counter inflow of cash in the business by way of return on investments, sales etc. However, cash receipts and cash payments do not perfectly synchronies with each other. Therefore, a firm requires an additional cash balance during the periods when payments are in excess of cash receipts. Thus transaction motive stresses on holding cash to meet anticipated obligations that are not counter balanced by cash receipts due to disparity of timings. 2. Precautionary Motive Under precautionary motive, the need to hold cash arises for meeting any unforeseen,unpredicted contingencies or unexpected disbursements. Such motives provide a

47

cushion to withstand unexpected cash requirements arising spontaneously at short notice due to various causes. In this regard, two factors largely influence the precautionary cash balance, degree of predictability and availability of short-term credit. If a cash management succeeds in estimating the cash requirements adequately, it escapes from maintaining big cash balance for emergency. Likewise, if a management is capable and efficient enough to borrow the required cash from short-term creditors small balance would be held and vice-versa. 'Ready borrowing power is the best antidote to emergency cash drains and facilitates release of available cash resources for remunerative 3. Speculative Motive The speculative motive finds its origin out of the desire of an enterprise to avail itselfthe benefits of the opportunities arising at unexpected moments that do not happen to exist in the normal course of business. This motive represents a positive and aggressive approach. Reasonable cash reserve is maintained by concerns for exploiting profitable opportunities like bulk purchase of raw materials at discounted prices, purchasing securities when interest rates are expected to fall, postpone purchase of raw material if decline in prices is anticipated, etc. 4. Compensation Motive Such motives require holding cash balance in case the concern enters into some loanagreement with the bank. Bank provides a great variety of services to its customers. For some of such services it charges commission or fee. While for other an indirect compensation is demanded by it by asking its customers to keep a minimum bank balance sufficient to earn a return equal to cost of services provided by it. Such balances are termed as compensating balances.

4.6

FINANCING OF CASH SHORTAGE AND COST OF RUNNING OUT OF CASH: A situation arises, when the cash outflows of a firm exceeds its inflows during a certain

period. Such situation creates cash shortage in a firm. Shortage of cash is highly undesirable in all sort of business holding for the reason of dreadful consequences that it bears. A management is deemed to be over-cautious and highly careful while dealing with the problem of cash shortage even if cash inflows are anticipated in the near future; else a concern may even reach the stage of final liquidation. Cash flow statement should be prepared to acknowledge the repercussions of transactions involving the movement of cash. As "Cash flow statement is made to show the

impact of various transactions on the cash position of a firm, it takes into consideration only such transactions that have relationship with cash." In case of temporary shortage of cash, a concern is required to procure essential cash immediately for the anticipated short duration, so as the curb it at the very stage instead of sustaining the long-term implication later on. 'The immediate source to fall back uponremains the bank credit." In fact, bank credit is a means to meet cash shortages as well as source of financing the current assets. The various methods from which a [ firm can procure funds during the period when its outflows exceed the inflows are stated below -(i) Using bank credit line, (ii) Raising loans from institutions and creditors other than banks. (Hi) Liquidity marketable securities, (IV) Resorting to bills discounting schemes, (v) Disposing of surplus fixed assets, (vi) Sheding the quantity of raw materials, (vii) Unloading finished goods even at loss, (viii) By delaying payments. As a piece of advice, it is recommended by the financial experts that a cash management should not start searching for external finance at the very instance when the cash shortage is anticipated. At the initial stage, a management should take appropriate steps to avoid or minimize the undesirable situation of emerging cash shortage by exercising effective! Control over internal resources. In this respect, the matters of special consideration that can be gainfully employed by the concern for overpowering the situation of cash shortage are 1. Increasing efforts to speedup collection, 2. Reduction in purchase of inventories, 3. Increasing cash sales, 4. Selling-off redundant assets, 5. Selling short-term investments. 6. Deferment of capital expenditure, 7. Postponing and delaying payments. These considerations are nothing but mere use of tact and skill to overcome a shortage of cash. They are much economical than any other resources (internal or external) for they cost neither interest nor any expenses. "Even if an external resources has to be found, this might be seen as a bridging operation pending the ability to bring on stream an alternativeinternal source." No sooner than a firm becomes aware of approaching shortage of cash than it should concentrate its efforts towards the eradication of such situation. The sooner the shortage is

49

provided for, the better it is. Every Concern escapes itself form lending into such a situation as it makes way for numerous costs because of running out cash. A firm bears not only the burden of unnecessary costs but is subjected to various types of pressures pertaining to its dealings. All these factors adversely affect the morale of management, causes damages to the hard-earned reputation and financial credit-worthiness etc. A firm is forced to borrow funds at high rates of interest has to accept higher price demand of suppliers, loses cash discount on payments, enter into further negotiations with banks and other financial institutions on account of slow payment.

4.7

FINANCING CURRENT ASSETS: Current assets of enterprises may be financed either by short-term sources or long-term

sources or by combination of both. The main sources constituting long-term financing are shares, debentures, and debts from banks and financial institutions. "The long term source of finance provides support for a small part of current assets requirements which is called theworking capital margin' Working capital margin is used here to express the difference between current assets and current liabilities. Short-term financing of current assets includes sources of shortterm credit, which a firm is mostly required to arrange in advance. Short-term bank loans, commercial papers etc. are a few of its components. Current liabilities like accruals and provisions, trade credit, short-term bank finance, short-term deposits and the like warranting the current assets are also referred to a short-term term sources of finance. Spontaneous financing can also finance current assets, which includes creditors, bills payable, and outstanding receipts. A product firm would always opt for utilizing spontaneous sources fully since it is free of cost. Every concerns that can no more be financed by spontaneous sources of financing has to decide between short-term and long-term source of finance along with relevant proportion of the two. There are three approaches of financing current assets that are popularly used.

1. Matching Approach As the name itself suggests, a financing instrument would offset the current asset under consideration, bearing financing instrument bearing approximately same maturity. In simple words, under this approach a match is established between the expected lives of current asset to be financed with the source of fund raised to finance the current assets. For this, reason a firm would select long-term financing to finance or permanent current assets to finance temporary or

variable current assets. Thus, a ten-year loan may be raised for financing machinery bearing expected life of ten years. Similarly, one-month stock can be financed by means of one-month bank loan. This is also termed as hedging approach. 2. Conservative Approach Conservative approach takes an edge over and above matching approach, as it ispractically not possible to plan an exact match in all cases. A firm is said to be following conservative approach when it depends more on long-term financial sources for meeting its financial needs. Under this financing policy, the fixed assets, permanent current assets and even a part of temporary current assets is provided with long-term sources of finance and this make it less risky nature. Another advantage of following this approach is that in the absence of temporary current assets, a firm can invest surplus funds into marketable securities and store liquidity. 3. Aggressive Approach As against conservative approach, a firm is said to be following aggressive financing policy when depends relatively more on short-term sources than warranted by the matching plan. Under this approach the firm finances not only its temporary current assets but also a part of permanent current assets with short-term sources of finance. In nutshell, it may be concluded that for financing of current assets, a firm should decide upon two important constraints; firstly, the type of financing policy to be selected (whether short-term or long-term and secondly, the relative proportion of modes of financing. This decision is totally based on trade-off between risk and return. As short-term financing is less costly but risky, long-term financing is less risky but costly. Smith and Ashburn define financial statements as the end product of financial accounting is a set of financial statements prepared by the accountant of a business enterprise that purport to reveal the financial position of the enterprise, the result of its recent activities, and an analysis of what has been done with earnings. Cash management is a financial term for certain services offered primarily to larger business customers. It may be used to describe all bank accounts (such as checking accounts) provided to businesses of a certain size, but it is more often used to describe specific services such as cash concentration, zero balance accounting, and automated clearing house facilities. Sometimes, private bank customers are given cash management services.

51

Cash management is the stewardship or proper use of an entitys cash resources. It serves as the means to keep an organization functioning by making the best use of cash or liquid resources of the organization. The function of cash management at the U.S. Treasury is threefold: 1. To eliminate idle cash balances. Every dollar held as cash rather than used to augment revenues or decrease expenditures represents a lost opportunity. Funds that are not needed to cover expected transactions can be used to buy back outstanding debt (and cease a flow of funds out of the Treasury for interest payments) or can be invested to generate a flow of funds into the Treasurys account. Minimizing idle cash balances requires accurate information about expected receipts and likely disbursements. 2. To deposit collections timely. Having funds in-hand is better than having accounts receivable. The cash is easier to convert immediately into value or goods. A receivable, an item to be converted in the future, often is subject to a transaction delay or a depreciation of value. Once funds are due to the Government, they should be converted to cash-in-hand immediately and deposited in the Treasury's account as soon as possible. 3. To properly time disbursements. Some payments must be made on a specified or legal date, such as Social Security payments. For such payments, there is no cash management decision. For other payments, such as vendor payments, discretion in timing is possible. Government vendors face the same cash management needs as the Government. They want to accelerate collections. One way vendors can do this is to offer discount terms for timely payment for goods sold.

CASHFLOW MANAGEMENT Cash is the oxygen that enables a business to survive and prosper, and is the primary indicator of business health. While a business can survive for a short time without sales or profits, without cash it will die. For this reason the inflow and outflow of cash need careful monitoring and management. It looks at the key elements of cash flow and at how cash flow management will help protect the financial security of your business. It outlines the steps that you can take when dealing with your customers, suppliers and stakeholders to improve cash flow. It also highlights common cash flow problems and how to avoid them.

Cash is the measure of your ability to pay your bills on a regular basis. This, in turn, depends on the timing and amounts of cash flowing into and out of the business each week and month - your cash flow. Cash includes: Coins and notes current accounts and short-term deposits bank overdrafts and short-term loans foreign currency and deposits that can be quickly converted to your currency. It does not include: long-term deposits long-term borrowing money owed by customers stock Difference between cash and profit It is important not to confuse cash with profit. Profit is the difference between the total amount your business earns and all of its costs, usually assessed over a year or other trading period. You may be able to forecast a good profit for the year, yet still face times when you are strapped for cash. Cash is king To make a profit, most businesses have to produce and deliver goods or services to their customers before being paid. Unfortunately, no matter how profitable the contract, if you don't have enough money to pay your staff and suppliers before receiving payment, you'll be unable to deliver your side of the bargain or receive any profit. To trade effectively and be able to grow your business, you need to build up cash reserves by ensuring that the timing of cash movements puts you in an overall positive cash flow situation. Cash inflows and cash outflows Ideally, during the business cycle, you will have more money flowing in than flowing out. This will allow you to build up cash reserves with which to plug cash flow gaps, seek expansion and reassure lenders and investors about the health of your business. You should note that income and expenditure cash flows rarely occur together, with inflows often lagging behind. Your aim must be to do all that you can to speed up the inflows and slow down the outflows. Cash inflows Payment for goods or services from your customers receipt of a bank loan interest on savings and investments shareholder investments Cash outflows Purchase of stock, raw materials or tools wages, rents and daily operating expenses purchase of fixed assets - PCs, machinery, office furniture, etc loan repayments dividend payments income

53

tax, corporation tax, VAT and other taxes. Many of your regular cash outflows, such as salaries, loan repayments and tax, have to be made on fixed dates. You must always be in a position to meet these payments, to avoid large fines or a disgruntled workforce. To improve everyday cash flow you can: ask your customers to pay sooner use factoring ask for extended credit terms with suppliers order less stock but more often lease rather

than buy equipment You can also improve cash flow by increasing borrowing, or putting more money into the business. This is acceptable for coping with short-term downturns or to fund growth in line with your business plan, but shouldn't form the basis of your cash strategy.

The principles of cash flow forecasting Cash flow forecasting enables you to predict peaks and troughs in your cash balance. It helps you to plan borrowing and tells you how much surplus cash you're likely to have at a given time. Many banks require forecasts before considering a loan.

Elements of a cash flow forecast The cash flow forecast identifies the sources and amounts of cash coming into your business and the destinations and amounts of cash going out over a given period. There are normally two columns listing forecast and actual amounts respectively. The forecast is usually done for a year or quarter in advance and divided into weeks or months. It is best to pick periods during which most of your fixed costs - such as salaries go out. The forecast lists: Receipts payments-excess of receipts over payments - with negative figures shown in brackets opening bank balance closing bank balance

It is important to base initial sales forecasts on realistic estimates. If you have an established business, an acceptable method is to combine sales revenues for the same period 12 months earlier with predicted growth. Note that all forecast figures must relate to sums that are due to be collected and paid out, not invoices actually sent and received. The forecast is a live entity. It will need adjusting in line with long-term changes to actual performance or market trends.

Accounting software will help you prepare your cash flow forecast, allowing you to update your projections if there's a change in market trends or your business fortunes. Planning for seasonal peaks and troughs is simplified and you can also make "what-if" calculations. Manage income and expenditure Effective cash flow management is as critical to business survival as providing services or products. Below are some of the key methods to help reduce the time gap between expenditure and receipt of income. Customer management Define a credit policy that clearly sets out your standard payment terms. Issue invoices promptly and regularly chase outstanding payments. Use an aged debtor list to keep track of invoices that are overdue and monitor your performance in getting paidConsider exercising your right to charge penalty interest for late payment. Consider offering discounts for prompt payment.Negotiate deposits or staged payments for large contracts. It's in your customers' interests that you don't go out of business trying to meet their demands.Consider using a third party to buy your invoices in return for a percentage of the total. Supplier management Ask for extended credit terms. Giving your suppliers incentives such as large or regular orders may help, but make sure you have a market for the orders you're placing. Alternatively, consider reducing stock levels and using just-in-time systems. Taxation Buy major items at the end rather than the start of a VAT period. This can greatly improve your cash flow - and may help plug a temporary cash flow gap. Asset management Consider leasing fixed assets (equipment), or buying them on hire purchase. Buying outright can result in a huge drain on cash in the first year of business. Cash flow problems and how to avoid them

No matter how effective your negotiations with customers and suppliers, poor business practices can put your cash flow at risk. Look out for:

55

Poor credit controls - failure to run credit checks on your customers are a high-risk strategy, especially if your debt collection is inefficient. Failure to fulfill your order - if you don't deliver on time or to specification you won't get paid. Implement systems to measure production efficiency and the quantity and quality of stock you hold and produce. Ineffective marketing - if your sales are stagnating or falling, revisit your marketing plan. Are you targeting your customers properly - or is one sales executive bringing in all the business? Inefficient ordering service - make it easy for your customers to do business with you. Use first class post and, where possible, accept orders over the telephone or Internet. Ensure catalogues and order forms are clear and easy to use. Poor management accounting - keep an eye on key accounting ratios that will alert you to an impending cash flow crisis or prevent you from taking orders you can't handle. Inadequate supplier management - your suppliers may be overcharging, or taking too long to deliver. Create a supplier management system. Cash management in action 1. The following simple example shows how a small, profitable business can run into

unforeseen cash flow problems when it takes on a new large order. 2. XYZ manufacturer is a small but profitable gift designer and supplier with three full-time

staff (including the two owners). It outsources production, but supplies the raw materials itself to save on costs. It then finishes and packages the final product on site. 3. XYZ does not have any loans or overdrafts. It has a long-term customer base of small gift

shops and visitor centers. 4. XYZ suddenly wins a large order to supply bespoke wall plaques for a chain of stores.

The contract promises to double its turnover. 5. The team takes on an additional employee and works flat out to meet the deadlines. It

doesn't notice an impending cash flow crisis resulting from a fall in repeat orders from existing customers combined with a jump in raw material costs. 6. To make matters worse, the new client keeps changing its mind about designs. A

misunderstanding means the first run of goods is rejected, causing a delay in payment and increased production costs. XYZ orders additional materials to make up the shortfall in the run.

7.

By the time the order is complete, XYZ is running an expensive overdraft. Profit margins

have been squeezed to the limit and it has lost several of its existing customers. A downturn in the fortunes of the retail chain means that it doesn't place any further orders.

8.

After a lot of hard work, XYZ finds itself back where it was five years earlier.

9.

Tighter cashflow management would have highlighted the fall in repeat orders and rise in

raw material costs. XYZ would also have benefited from a client contract that included: milestone payments and penalty provisions for changes such as those to designs -eg increased fees sharing the cost of additional materials with the new client or getting the client to pay for them Refinements to a simple cash flow forecast There is no single best way to set out a cash flow forecast. Some refinements to the most basic ways of setting out the information will give you a more sophisticated view of your business' situation. You could, for example, separate cash flow for business operations from funding cash flow. This gives a clearer picture of the actual performance of your business and is a format that many accountants prefer. Cash flow from operations Includes inflows such as: cash sales receipts from credit sales in earlier periods interest on savings Includes outflows such as: payments to suppliers hire purchase and lease payments expenses - rent, rates, insurance, utilities, telephone, etc wages taxes and National Insurance interest on loans and bank charges Funding cash flows Includes inflows such as: loans from banks increase in share capital Includes outflows such as: dividends paid loans repaid With these two types of cash flow separated you can gauge how self-sufficient the day-to-day working of your business is. A net outflow in operational cash flow is usually an indicator of problems that need to be addressed quickly. The overall efficiency of a business concern is best reflected by its financial soundness and profitability over the number of years. Analyzing the financial statements i.e., the profits & loss Account and balance sheet can ascertain the financial soundness of the concern with the help of different tools and techniques. The term financial statement analysis includes both analysis

57

and interpretation. It is the process of critical examining the accounting information in detail given in the financial statements and drawing inferences. It helps to bring out the details behind the financial statements. 4.8 RATIO ANALYSIS Ratio analysis is one of the powerful tools of the financial analysis. A ratio can be defined as

the indicated quotient of two mathematical expressions, and as the relationship between two or more things. Ratio is, thus, the numerical or an arithmetical relationship between the two figures. It is expressed where one figure is divided by another. A Ratio is the relation between two Accounting items expressed mathematically. Ratio analysis helps the analyst to make quantitative judgment with regard to concerns financial position and performance. Accounting ratios can be expressed in various ways such as: A pure ratio say ratio of current assets to current liabilities is 2:1. A rate say current assets are two times of current liabilities or A Percentage say current assets are 200% of current liabilities.

Each method of expression has a distinct advantage over the other. The analyst will select that mode which will best suit his convenience and purpose. 4.9 ADVANTAGE OF RATIO ANALYSIS: Useful in financial position analysis. Useful in simplifying accounting figures. Useful in assessing the operational efficiency. Useful in forecasting purposes. Useful in locating the weak spots of the business Useful in comparison of performance.

4.10 LIMITATIONS OF ACCOUNTING RATIOS: False result if based on incorrect accounting data. No idea of probable happenings in future. Variation in accounting methods. Price level changes Only one method of analysis No common standards. Different meanings assigned to the same term.

Ignore qualitative factors. No use if ratios are worked out for insignificant and unrelated figures.

4.11 RATIOS USED 1) CURRENT RATIO Current ratio may be defined as the relationship between current asset and liabilities. It is the ratio between total current assets and total current liabilities. It is a measure of general liquidity and is most widely used to make the analysis of short term financial position or liquidity of a firm. A current ratio of 2:1 is considered satisfactory.

Current ratio =

Current Assets Current Liabilities

2) LIQUID RATIO OR QUICK RATIO Quick ratio is the ratio of liquid asset to liquid liabilities. It established the relationship between quick asset and quick liabilities. It is also called Acid Test Ratio. Liquid asset or quick asset include cash, bank, balance, debtors, bills receivable and short term securities. A liquid ratio of 1:1 is considered satisfactory.

Liquid ratio = 3) INTEREST COVERAGE RATIO

Liquid Assets Current Liabilities

Interest coverage ratio indicates the financial position of the enterprise to meet interest payment out of current earnings. This ratio is very important as it gives an idea of the number of times that fixed interest charges covered by earnings. Profit before depreciation and tax Interest coverage ratio = Interest charges

4) DEBTORS TURNOVER RATIO Debtors turnover ratio establishes the relationship between net credit sales and average debtors including bills receivable. This ratio shows how quickly debtors are realized or

59

converted into cash. The analysis of the debtors turnover ratio supplements the information regarding the liquidity of one item of current assets of the firm. The ratio measures how rapidly debts are collected. A high ratio is indicative of shorter time lag between credit sales and cash collection. A low ratio shows that debts are not being collected rapidly. Net credit sales Debtors turnover ratio = Average debtors 5) AVERAGE COLLECTION PERIOD Average collection period measure the quality of debtors since it measures the rapidity of collection period and so it implies the prompt the payment by debtors. It reduces the changes of bad debts. A longer collection period implies too liberal and insufficient credit collection performance.

No. of days in an accounting year Average collection period = Debtors turnover ratio

6) NET PROFIT RATIO Net profit ratio established the relationship between net profit and sales and indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. A high net profit ratio would indicate higher overall efficiency of the business, better utilization of limited resources and reasonable return to owners. A low net profit ratio would mean low efficiency and inadequate return to owners

Net profit ratio =

Net profit Net sales

*100

FIXED ASSET TURNOVER RATIO Fixed asset turnover establishes the relationship between net sales and fixed asset. It measures the efficiency with which a firm is utilizing its fixed asset in producing sales. This ratio measures the efficiency with which a firm is utilizing its fixed asset in producing sales. This

ratio measures the efficiency with which a firm is utilizing its fixed asset in generating sales. The term fixed assets for this ratio is the depreciated value of fixed assets that is the amount of depreciation is deducted from the value of fixed assets. A higher ratio reflects overtrading and a lower ratio indicates idle capacity. Net sales Fixed asset turnover ratio = Net fixed assets 7) TOTAL ASSET TURNOVER RATIO This ratio established the relationship between net sales and total asset. The asset turnover ratio is used to measure the efficiency of a firm in managing and utilizing its asses. This ratio is also known as the investment turnover ratio. The higher the ratio, the more efficient and utilization of the assets and vice versa.

Net sales Total asset turnover ratio = Total assets

8) WORKING CAPITAL TURNOVER RATIO Working capital ratio expresses the relationship between sales and working capital. The ratio shows how many items the working capital is turned over to produce sales. The higher the ratio, the more efficient and utilization of working capital and vice versa.

Net sales Working Capital turnover ratio = Net working capital

9) NET RETURN ON ASSETS Net return on assets establishes the relationship between net profit and total assets and indicates the efficiency of assets used in manufacturing, selling, administrative and other activities of the firm. A high Net return on assets would indicate higher overall efficiency of the better utilization of limited resources and reasonable return to owners. A low net return on assets would mean low efficiency and inadequate return to owners.

61

Net return on assets =

Net profit Total assets

4.12 TECHNIQUES OF ANALYSIS AND INTERPRETATION Comparative Financial Statements. Common Measurement Statements. Trends Percentages Analysis. Funds Flow Statement. Net Working Capital. Cash Flow Statements. Ratio Analysis.

Chapter-V

5 Survey
1) FOLLOWING TABLE SHOWS CURRENT RATIO Formula: Current ratio = Current Assets Current Liabilities

Table no 1 (Rs in lakhs) Years 2007-08 2008-09 2009-10 2010-11 2011-12 Current Assets 1304 53082 133275 39044 9063 Current Liabilities 1488 43323 57662 25228 121462 Current Ratio 0.876 1.225 2.311 1.548 0.075

Source: - Data collected from Financial Statements of the company. Interpretation:

The above table shows that there was a gradual increase in the current ratio from the year 200708 to 2009-10 and drastically decreases in 2011-12. The ratio values are 0.876, 1.225, 2.311, 1.548 and 0.075 in the year 2007-08 to 2011-12 respectively.

The standard current ratio is 2:1. The company had good current ratio in the year 2009-10 and later it is not maintaining proper current asset to get a good current ratio to meet the standard. It is strongly recommended to the company to maintain more current assets to reduce the liquidity problem in the future.

63

Graph no -1

Current Ratio
2.5 2.311

Current Ratio

2 1.548 1.5 Ratio 1.225 1 0.876

0.5 0.075 0 2007-08 2008-09 2009-10 Years 2010-11 2011-12

2) FOLLOWING TABLE SHOWS LIQUID RATIO Formula:

Liquid ratio =

Liquid Assets Current Liabilities

Table no 2 (Rs in lakhs) Years 2007-08 2008-09 2009-10 2010-11 2011-12 Liquid Assets 1226 27079 80981 9124 2913 Current Liabilities 1488 43323 57662 25228 121462 Liquid Ratio 0.824 0.625 1.404 0.362 0.024

Source: - Data collected from Financial Statements of the company.

Interpretation:

The above table shows that there was a gradual decrease in the liquid ratio from the year 2009-10 to 2011-12. The ratio values are 0.824, 0.625, 1.404, 0.362 and 0.024 in the year 2007-08 to 2011-12 respectively.

The standard quick ratio is 1:1. The company is at the danger liquidity position to meet its liquidity liabilities in all the years except 2009-10. The company must improve their liquid assets to avoid dangerous position and meet liquid liabilities in the future.

65

Graph no -2

Liquid Ratio
1.6 1.4 1.2 1 Ratio 0.8 0.6 0.4 0.2 0 2007-08 0.362 0.824 0.625 1.404

Liquid Ratio

0.024 2008-09 2009-10 Years 2010-11

2011-12

3) TABLE SHOWS INTEREST COVERAGE RATIO

Formula: Interest coverage ratio = Profit before depreciation and tax Interest charges

Table no 3 (Rs in lakhs) Years 2007-08 2008-09 2009-10 2010-11 2011-12 Interest charges 2582 18521 21263 8165 13068 Profit before depreciation and tax 4424 -26010 -14607 -6986 -18240 Interest coverage ratio 1.713 -1.404 -0.687 -0.856 -1.396

Source: - Data collected from Financial Statements of the company.

Interpretation: Interest Coverage Ratio indicates the financial position of the enterprise to meet interest payment out of current earnings.

Lower ratio indicates excessive use of debt and the inability to offer assured of interest to creditors. It went in to negative in the year 2008-09 to 2011-12 it indicates dangers position since the company incurred huge losses. The company has 1.713, (1.404), (0.687), (0.856) and (1.396) interest coverage ratio from the year 2007-08 to 2011-12 respectively. The company had negative ratio from last 4 years shows loss trend in the business leads to in sufficient cash position to meet the interest payments.

67

Graph no -3

Interest coverage ratio

2 1.713 1.5 1 0.5 Ratio 0 2007-08 -0.5 -0.687 -1 -1.5 -2 -1.404 -0.856 -1.396 2008-09 2009-10 2010-11 2011-12 Interest coverage ratio

Years

4) TABLE SHOWS DEBTORS TURNOVER RATIO AND AVERAGE COLLECTION PERIOD:Formula: Net credit sales Debtors turnover ratio = Average debtors

No. of days in an accounting year Average collection period = Debtors turnover ratio

No of days in an accounting year = 365 days

Table no 4 (Rs in lakhs) Years 2007-08 2008-09 2009-10 2010-11 2011-12 Net Sales 14,241 76,020 126,507 3,991 18,321 Debtors 77 24,705 44,013 790 4,754 Debtors Turnover Ratio 184.03 3.08 2.87 5.05 3.85 Average collection Period 1.98 118.62 126.99 72.24 94.71

Source: - Data collected from Financial Statements of the company.

Interpretation:

Debtor Turnover Ratio measures the efficiency in management of debtors. A high ratio is indicative of shorter time lag between credit sales and cash collection. A low ratio shows that debts are not being collected rapidly.

From the above table in can be inferred that debtors turnover ratio of the company is consistent. The ratio is 184.03, 3.08, 2.87, 5.05 and 3.85 in the year 2007-08 to 2011-12 respectively.

A longer collection period implies too liberal and insufficient credit collection performance and vice versa. Average collection Period of the company in the year 2007-08 is 1.98 which is lowest, and the remaining years have higher collection period which implies too liberal and insufficient credit collection performance. It is recommended to improve Debtor Turnover Ratio to reduce Average collection Period.

69

Graph no -4

Graph Shows Net sales and Debtors

Net sales and Debtors (Rs in lakhs) 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0
126,507

76,020
44,013

Net Sales
18,321 3,991 790
4,754

14,241
77

24,705

Debtors

2007-08

2008-09

2009-10 Years

2010-11

2011-12

Graph no -5

200 150 Ratio 100 50 0

184.03

Debtors Turnover Ratio

Debtors Turnover Ratio

3.08
2007-08 2008-09

2.87
2009-10

5.05
2010-11

3.85
2011-12

Years

Graph No -6

Average collection Period

150 Days 100 72.24 50 1.98 0
2007-08 2008-09 2009-10 2010-11

118.62

126.99 94.71

Average collection Period

Years

2011-12

5) TABLE SHOWS NET PROFIT RATIO Formula: Net profit ratio= Net profit Net sales Table no 5 Years Net Profit (Rs in lakhs) 2007-08 2008-09 2009-10 2010-11 2011-12 4,427 -33,133 -28,614 -6,913 -19,193 Net Sales (Rs in lakhs) 14,241 76,020 126,507 3,991 18,321 Net Profit Ratio 0.31 -0.44 -0.23 -1.73 -1.05 *100

Source: - Data collected from Financial Statements of the company. Interpretation: During the year 2006-07 the company has maximum net profit ratio of 0.31 and the minimum net profit ratio of (1.73) in the year 2010-11. The company has continuous negative profits since 2008-09, in the last year the net profit ratio is (1.05) in the year 2011-12. The company has to take necessary steps to achieve good profits in the future to avoid the financial problems. Graph no -7

Net Profit
Net profit (Rs in lakhs)
10,000 0 2007-08 2008-09 2009-10 -20,000 -30,000 -40,000 -33,133 -28,614 2010-11 -6,913 -19,193 2011-12 Net 4,427

-10,000

Years

71

Graph no -8

Net Profit Ratio

0.5 0.31

0 2007-08 -0.5 Ratio 2008-09 -0.44 2009-10 -0.23 Net Profit Ratio 2010-11 2011-12

-1 -1.05 -1.5 -1.73 Years

-2

6) TABLE SHOWS FIXED ASSET TURN OVER RATIO Formula: Net sales Fixed asset turnover ratio = Net fixed assets

Table no 6 (Rs in lakhs) Years 2007-08 2008-09 2009-10 2010-11 2011-12 Net sales 14,241 76,020 126,507 3,991 18,321 Net Fixed assets 182 30,009 45,123 222 1,966 Fixed asset turnover ratio 78.05 2.53 2.80 17.94 9.32

Source: - Data collected from Financial Statements of the company.

Interpretation: Highest Fixed assets turnover ratio indicates better performance of the company and vice versa. The fixed assets turnover ratios from the year 2007-08 to 2011-12 are 78.05, 2.53, 2.80, 17.94 and 9.32. The company has highest fixed ratio in the year 2007-08. It is recommended to improve fixed assets turnover ratio in future to increase the cash turnover. Graph no -9

Fixed asset turnover ratio

90 80 70 60 Ratio 50 40 30 20 10 0 2007-08 2008-09 2009-10 2010-11 2011-12 Years 2.53 2.8 17.94 9.32 Fixed asset turnover 78.05

7) TABLE SHOWS ASSET TURNOVER RATIO Formula: Net sales Total asset turnover ratio = Total assets Table No 7 Years 2007-08 2008-09 2009-10 2010-11 2011-12 Net sales (Rs in lakhs) 14,241 76,020 126,507 3,991 18,321 Total assets (Rs in lakhs) 80,121 266,312 462,829 156,717 258,118 Total assets turnover ratio 0.18 0.29 0.27 0.03 0.07

Source: - Data collected from Financial Statements of the company.

73

Interpretation: Highest Assets turnover ratio indicates better performance of the company and vice verse. From the above table it can be seen that Asset turnover ratio has been fluctuating. In the year 2007-08 the ratio is 0.18 and it is increased to 0.29 in the year 2008-09. After that it has been constantly decreased in the following years. Graph no -10

Total assets turnover ratio

0.3 Ratio 0.2 0.1 0 2007-08 2008-09 2009-10 Years 0.03 0.07 0.18 0.29 0.27

Total assets turnover ratio

2010-11

2011-12

8) TABLE SHOWS WORKING CAPITAL RATIO

Formula:

Net sales Working Capital turnover ratio = Net working capital Net Working Capital = Current assets Current Liabilities

Table no 8 (Rs in lakhs) Years 2007-08 2008-09 2009-10 2010-11 2011-12 Net Sales 14,241 76,020 126,507 3,991 18,321 Net Working Capital -184 9759 75613 13816 -112399 Working Capital Ratio -77.40 7.79 1.67 0.29 -0.16

Source: - Data collected from Financial Statements of the company. Interpretation: The working capital ratios for the year 2007-08 to 2011-12 are (77.4), 7.79, 1.67, 0.29 and (0.16). The company has highest working turnover ratio in the year 2008-09. The companys working capital turnover is at the standard ratio which indicates working capital is effectively utilized in making sales.It is recommended to maintain same or improve Working Capital Turnover Ratio. Graph no -11

Working Capital Ratio

20 0 Ratio -20 -40 -60 -80 -77.4 2007-08

7.79

1.67

0.29

-0.16

2008-09

2009-10

2010-11

2011-12

Working Capital Ratio Years

75

9) TABLE SHOWS NET RETURN ON ASSETS

Formula: Net return on assets = Net profit Total assets Table no 9 (Rs in lakhs) Years 2007-08 2008-09 2009-10 2010-11 2011-12 Net Profit
4,427 -33,133 -28,614 -6,913 -19,193

Total assets
80,121 266,312 462,829 156,717 258,118

Net return on assets

0.055 -0.124 -0.062 -0.044 -0.074

Source: - Data collected from Financial Statements of the company. Interpretation: During the year 2007-08 the company has maximum net return on assets of 0.31 and the minimum net return on assets of (0.124) in the year 2008-09. The company has continuous negative net return on assets since 2008-09, in the last year the net return on assets is (0.074) in the year 2011-12. The company has to take necessary steps to use the assets appropriately to achieve profits in the future to avoid the financial problems. Graph no -12

Net return on assets

0.1 Axis Title 0 -0.1 -0.2
2007-08 2008-09 2009-10

Net return on assets

2010-11 2011-12

Net return on assets, -0.074

SUMMARY OF FINDINGS There was a gradual increase in the current ratio from the year 2007-08 to 2009-10 and drastically decreases in 2011-12. The company had good current ratio in the year 2009-10 and later it is not maintaining proper current asset to get a good current ratio to meet the standard. The company is at the danger liquidity position to meet its liquidity liabilities in all the years except 2009-10. Interest Coverage Ratio is negative in the year 2008-09 to 2011-12 it indicates dangers position since the company incurred huge losses. The company had negative ratio from last 4 years shows loss trend in the business leads to in sufficient cash position to meet the interest payments. The debtors turnover ratio of the company is consistent. The ratios are 184.03, 3.08, 2.87, 5.05 and 3.85 in the year 2007-08 to 2011-12 respectively. Average collection Period of the company in the year 2007-08 is 1.98 which is lowest, and the remaining years have higher collection period which implies too liberal and insufficient credit collection performance. The company has continuous negative profits since 2008-09, in the last year the net profit ratio is (1.05) in the year 2011-12. The fixed assets turnover ratios from the year 2007-08 to 2011-12 are 78.05, 2.53, 2.80, 17.94 and 9.32. The company has highest fixed ratio in the year 2007-08.
Asset turnover ratio has been fluctuating. In the year 2007-08 the ratio is 0.18 and it is

increased to 0.29 in the year 2008-09. After that it has been constantly decreased in the following years.
The companys working capital turnover is at the standard ratio which indicates working

capital is effectively utilized in making sales.

The company has continuous negative net return on assets since 2008-09, in the last year the

net return on assets is (0.074) in the year 2011-12. The company has to take necessary steps to use the assets appropriately to achieve profits in the future to avoid the financial problems.

77

6 RECOMMENDATIONS & CONCLUSION

RECOMMENDATIONS It is strongly recommended to the company to maintain more current assets to reduce the liquidity problem in the future. The company must improve their liquid assets to avoid dangerous position and meet liquid liabilities in the future. It is recommended to improve Debtor Turnover Ratio to reduce Average collection Period. The company has to take necessary steps to achieve good profits in the future to avoid the financial problems. It is recommended to improve fixed assets turnover ratio in future to increase the cash turnover.

CONCLUSION

The performance of Network18 Media & Investments Limited in the financial year 200910 was satisfactory. The company has been continuing loss trend from past four years leads to biggest difficult with the cash management.The investments are good in the past four years represents a very significant proportion of total assets. The size of the fixed assets is increased in the year 2008-09 and 2009-10 which indicate inefficient fixed assets management leads to block of cash in the form of assets. This study has revealed that there are some defects in the company which relates to boost up the income, and blockage of working capital in other forms. By adopting some of latest technique of control and recommendations made in the study there is every chance improving cash management of the organization.The above recommendations considered by the management, this might help them in their efforts to control cash and also the investments in different assets involved.

7 BIBLIOGRAPHY
Books Referred: I.M.Pandey- Financial management 9th Edition Vikas Publishing House Pvt.Ltd Prasannachandra -Financial management-7th Edition-Tata McGraw-Hill Publication. S.P.Jain,K.L.Narang, SimmiAgarwal: Accounting for Managers Kalyani Publishers. Kaheshwri S N Principles of Management Accounting- Sultan Chand and Sons Publishers, New Delhi Websites: www.imfomedia18.com www.network18publishing.com www.network18.com www.moneycontrol.com Magazine: Annual Reports of network 18 pvt ltd.

79

NETWORK18 MEDIA & INVESTMENTS LIMITED(Group Holding Company)

STRONG GROWTH POSTED ACROSS ENTERTAINMENT, HOMESHOPPING & NEWSWIRE BUSINESSES; REASONABLY GOOD GROWTH IN GENERAL & BUSINESS NEWS CHANNELS, PRINT & WEB BUSINESSES CONSOLIDATED REVENUES UP NEARLY 31% YOY AND 25% QOQ 8 OUT OF 9 CHANNELS ARE NUMBER 1 IN THEIR RESPECTIVE CATEGORIES Colors is the No.1 GEC; Ahead of Star Plus and Zee TV CNBC-TV18 Dominates Business News Genre; Far Ahead of the No.2 Channel CNN-IBN Maintains Top Position Among General News Channels; Most Viewed Channel On The Budget Day CNBC AWAAZ Leads Over Zee Business and NDTV Profit MTV is the No.1 Youth Entertainment Channel Nickelodeon Continues to Lead Kids Entertainment Genre Vh1 Viewership Grows 100% YoY IBN Lokmat Grabs No.1 Position Among Marathi News Channels IBN7 Maintains Strong Position in Hindi News

HOMESHOP18'S COMMISSION INCOME DOUBLES ON YOY BASIS; GROSS SALES CROSS RS 450 MN IN QUARTER; TRANSACTIONS GROW 87% (YOY) TOUGH QUARTER FOR THE INDIAN FILM COMPANY AT THE BOX OFFICE; IMPROVED SLATE OF FILMS EXPECTED FOR THE SECOND HALF OF THE YEAR. SPORT18 & E18 POST A SEQUENTIAL REVENUE GROWTH OF 30% NET ASSET VALUE AT RS 140.071 PER SHARE (VS CMP OF RS 93.002)

TELEVISION EIGHTEEN INDIA LIMITED(Listed Subsidiary of Network18)

ALL BUSINESS UNITS REPORT SEQUENTIAL GROWTH IN REVENUES; ALL SET TO TURN EBITDA POSITIVE ON CONSOLIDATED BASIS; SUCCESSFUL COMPLETION OF RIGHTS ISSUE TO SUBSTANTIALLY DE-LEVERAGE BALANCE SHEET BUSINESS NEWS CHANNELS: CNBC Universe Dominates Business News Genre With 65% Market Share Revenues Up 14% (QOQ); Operating Margin At 16% Revenues Expected To Grow YOY From Next Quarter Onwards, Ending Four Quarters Of De-Growth 1) Mark to Market NAV (on the basis of unaudited financials of the Quarter ended Sept. 30, 2009) certified by a Category 1 merchant banker - SPA Merchant Bankers Limited 2) Current Market Price Closing price of October 16, 2009 on National Stock Exchange

WEB18 REVENUES UP 13% SEQUENTIALLY; CASH POSITIVE OPERATIONS NEXT TARGET Operating Losses Cut down Sharply fromRs 175-190 mn Per Quarter in Q2/Q3 Last Year ToRs 51 mn In Q2 Commences Strategic Partnership with Nokia, The Global Leader In Mobile TechnologyIn.Com is Firmly Placed at No.2 Position among Indian Portals; Web18s Unique Users Grow More Than Rediff.com and Times Internet in Q2

INFOMEDIA18 REVENUES GROW BY MORE THAN 23% QOQ; FOCUS NOW ON TURNING EBITDA POSITIVE

81

Infomedia Yellow Pages Selected As Super brand In Its Category Alibaba Venture Order Book Continues To Grow Sequentially

NEWSWIRE18 - REVENUES UP 54% (YOY) & UP 6% (QOQ); TURNS EBITDA POSITIVE

Operating Profit AtRs 2.01 mn VS Loss of Rs 27.75 mn in Q2 Last Year Better Sales Expected In H2 As Market Sentiments Improves Gearing Up To Launch New Products On Mobile Platform

FORBES INDIA CONTINUES STRONG UPTREND IN CIRCULATION AND SALES

ibn18 BROADCAST LIMITED (Earlier known as Global Broadcast News Limited - Listed Subsidiary of Network18)

IBN18 CONSOLIDATED REVENUES AT RS 1371.4 MN; 28% HIGHER THAN IN Q1 COLORS IS THE NUMBER 1 GEC REVENUE RUN RATE CROSSES RS 6000 MN PER ANNUM Reaches peak GRP of 325 in Q2 Highest for any GEC in 2009; Firmly Ahead of Star Plus& Zee TV Maintains No.1 position in 8 weeks during the quarter Ad revenues grow 46% Q-o-Q

STRONG GROWTH FOR MTV, NICK & VH1 MTV Undisputed Leader in Youth Entertainment/ Music; Double the No.2s ratings; Ad Revenues up 17% (Q-o-Q) Nick Leader in Kids Genre; 10% Y-o-Y Growth in Viewership Vh1 100% Y-o-Y Viewership Growth; Remains a unique offering in International Entertainment

VIACOM18: REVENUES GROW 36% Q-O-Q

NEWS CHANNELS BUILD ON LEADERSHIP POSITIONS HOWEVER, REVENUES LOWER IN Q2 FOLLOWING AN EXCEPTIONAL ELECTIONS QUARTER CNN IBN The No.1 English News Channel for the Union Budget IBN7 continues to consolidate its position in Hindi News IBN Lokmat pushes ahead in the build up to the Maharashtra state elections; Q-o-Q Revenues Grow 84%

7.1 Network18 Media and Investments Limited:

Consolidated Unaudited Financial Performance for the Quarter Ended 30 th September 2009

Particulars

Q2 2009-10

Q1 2009-10

Q2 2008-09

REVENUES: OPERATIONS

2829.78

2265.14

2154.04

83

I : Revenues: Media Operations a) Television Eighteen India Ltd (As published) 1) News Operations 2) Web18 3) Newswire18 4) Infomedia18 b) ibn18 Broadcast Limited (As published) c) Homeshop18 (Unlisted Subsidiary) d) TIFC (Listed Subsidiary wef 7th September 2009) e) Setpro18 (Unlisted Subsidiary) f) Events & Sports Management (Division) g) Advisory Services (Division) II : Revenues from Investment Activities III : Less - Inter Company Revenues 647.43 160.08 78.88 353.72 1361.37 108.38 124.76 286.84 52.32 1.28 49.50 (394.78) 568.57 142.10 74.48 288.12 1066.72 89.28 0.00 184.10 40.28 3.16 13.94 (205.61) 808.23 152.68 51.20 290.48 307.68 50.29 0.00 152.58 43.87 0.00 462.40 (165.38)

Operating Expense Operating Profit Operating Margin

3243.93 (414.15) -14.64%

2357.24 (92.10) -4.06%

1918.38 235.66 10.94%

Net Outflow on Revenue Share with CNBC & CNN Interest/Income from Investments Interest Expense Interest (Net) Depreciation Non Recurring (Expenditure) Non Recurring Income

(53.45) 44.56 (535.61) (491.05) (187.65) (296.74) 0.00

(51.67) 72.80 (497.38) (424.58) (173.78) (304.88) 514.60

(59.62) 99.96 (443.43) (343.48) (147.67) 0.00 0.00

Prior period and exceptional items

(8.46)

(1.49)

(33.86)

Total Profit Before Tax, Minority Interest and ESOP Charge Out Provision for Current Tax/FBT Profits After Tax (before minority interest and ESOP charge out) Minority Interest Share in Losses of Associates Profits After Tax and Minority Interest (before ESOP charge out) ESOP charge out Profits After Tax and ESOP charge out Exchange Fluctuations Profits After Exchange Fluctuations Provision for Deferred tax Net Profit After Deferred Tax Paid up Equity Share Capital EPS (Rs.) without ESOP charge out EPS (Rs.) with ESOP charge out

(1451.50) (9.06)

(530.92) (24.18)

(348.98) 33.80

(1442.44) (717.85) 0.00

(555.10) (209.88) 0.00

(387.77) (330.74) (33.23)

(724.59) (14.70) (739.29) (64.55) (803.84) 29.79 (833.63) 479.53 (8.54) (8.69)

(345.22) (30.34) (375.56) (24.74) (350.82) 12.71 (363.53) 479.43 (3.47) (3.79)

(90.26) (38.09) (128.36) (39.41) (167.77) 0.00 (167.77) 308.94 (2.10) (2.72)

85

7.2 Network18 Media and Investments Limited:

Standalone Unaudited Financial Performance for the Quarter Ended 30th September 2009

Particulars

Q2 2009-10

Q1 2009-10

Q2 2008-09

REVENUES: OPERATIONS

103.10

57.38

506.03

Operating Expense Operating Profit Operating Margin

96.90 6.20 6.01%

88.73 (31.35) -54.64%

247.30 258.73 51.13%

Interest/Income from Investments Interest Expense Interest (Net) Depreciation Non Recurring Income / (Expenditure)

0.00 (113.97) (113.97) (2.70) 3.35

0.00 (100.30) (100.30) (0.72) 1.49

0.00 (146.98) (146.98) (0.90) 21.64

Total Profit Before Taxand ESOP Charge Out Provision for Current Tax/FBT Profits After Tax (before ESOP charge out) ESOP charge out Profits After Tax and ESOP charge out Exchange Fluctuations

(107.11) 0.00 (107.11) 0.00 (107.11) 0.00

(130.88) 0.00 (130.88) 0.00 (130.88) 0.00

132.48 0.65 131.83 0.71 131.12 0.00

Profits After Exchange Fluctuations Provision for Deferred tax Net Profit After Deferred Tax Paid up Equity Share Capital EPS (Rs.) without ESOP charge out EPS (Rs.) with ESOP charge out

(107.11) 0.00 (107.11) 479.53 (1.12) (1.12)

(130.88) 0.00 (130.88) 479.43 (1.36) (1.36)

131.12 0.00 131.12 308.94 2.13 2.12

87

7.3 Television Eighteen India Limited:

Consolidated Unaudited Financial Performance for the Quarter ended 30th September 2009

Rs. mn.

7.3.1.1.1.1.1 Total Revenues (Part I, II, III and IV)

1240.11

1073.26

1302.59

Part I: News Operations

Q2 2009-10 Q1 2009-10 Q2 2008-09

7.3.1.1.2

Particulars

REVENUES: NEWS OPERATIONS

647.43

568.57

808.23

Operating Expense Operating Profit Operating Margin

547.11 100.32 15.50%

471.20 97.37 17.13%

488.19 320.04 39.60%

Net Outflow on Revenue Share with CNBC Interest/Income from Investments Interest Expense Interest (Net) Depreciation

(35.06) 35.781 (288.32) (252.58) (53.55)

(36.83) 37.16 (283.42) (246.26) (53.52)

(45.04) 128.56 (221.11) (92.54) (55.49)

Profit Before Tax, Minority Interest and ESOP

(240.80)

(239.23)

126.96

Charge Out

Prior Period Income /(expense) Profit Before Tax, Minority Interest, ESOP Charge Out but After Prior Period Income /(expense)

(8.33)

0.00

0.00

(249.14)

(239.23)

126.96

Provision for Current Tax/FBT Profits After Tax (before minority interest and ESOP charge out) Minority Interest Share in Loss of Associates Profits After Tax and Minority Interest (before ESOP charge out)

(2.19)

3.22

23.47

(246.95) 0.00 0.00

(242.46) 0.00 11.83

103.49 0.00 0.00

(246.95)

(230.62)

103.49

ESOP Charge Out Profits After Tax and ESOP Charge Out Exchange Fluctuations Profits After Exchange Fluctuations Provision for Deferred Tax Net Profit After Deferred Tax Paid up Equity Share Capital EPS (Rs.) without ESOP Charge Out EPS (Rs.) with ESOP Charge Out

4.70 (251.65) 49.64 (301.29) 29.79 (331.07) 600.07 (2.72) (2.76)

10.82 (241.44) 30.20 (271.64) 11.07 (282.71) 600.07 (2.17) (2.36)

27.43 76.06 33.28 42.78 0.00 42.78 599.40 0.59 0.36

89

7.4 Television Eighteen India Limited:

Consolidated Unaudited Financial Performance for the Quarter ended 30th September 2009

Part II: Web18

Rs. mn.

Particulars

Q2 2009-10

Q1 2009-10

Q2 2008-09

REVENUES: OPERATIONS

160.08

142.10

152.68

Operating Expense Operating Profit

211.45 (51.37)

179.98 (37.88)

342.48 (189.80)

Interest/Income from Investments Interest Expense Interest (Net) Depreciation

0.00 (4.33) (4.33) (43.36)

0.00 (4.65) (4.65) (40.70)

0.77 (6.87) (6.10) (46.36)

Profit Before Tax and Minority Interest and ESOP Charge Out

(99.06)

(83.23)

(242.27)

Provision for Current Tax/FBT Profits After Tax (before minority interest and ESOP charge out) Minority Interest Profit After Tax and Minority Interest

0.00

5.00

5.80

(99.06) 1.27 (100.33)

(88.23) (2.33) (85.89)

(248.07) (10.03) (238.04)

ESOP Charge Out Profits After Tax and ESOP Charge Out Exchange Fluctuations Profits After Exchange Fluctuations Provision for Deferred Tax Net Profit After Deferred Tax

0.00 (100.33) 0.00 (100.33) 0.00 (100.33)

0.00 (85.89) 0.00 (85.89) 0.00 (85.89)

8.37 (246.41) 0.73 (247.14) 0.00 (247.14)

91

7.5 Television Eighteen India Limited:

Consolidated Unaudited Financial Performance for the Quarter ended 30 September 2009
th

Part III: Newswire18

Rs. mn. Particulars Q2 2009-10 Q1 2009-10 Q2 2008-09

REVENUES: OPERATIONS

78.88

74.48

51.20

Operating Expense Operating Profit Operating Margin

76.87 2.01 2.55%

74.67 (0.19) -0.26%

78.96 (27.75) -54.20%

Interest/Income from Investments Interest Expense Interest (Net) Depreciation

0.07 (7.29) (7.21) (8.08)

0.06 (6.30) (6.24) (7.93)

0.00 (6.87) (6.87) (5.30)

Profit Before Tax and Minority Interest Provision for Current Tax/FBT Profits After Tax (before minority interest) Minority Interest Profits After Tax and Minority Interest

(13.28) 0.00

(14.37) 0.00 (14.37) 0.00 (14.37)

(39.93) 0.33

(13.28) 0.00 (13.28)

(40.26) 0.00 (40.26)

Exchange Fluctuations Profits After Exchange Fluctuations Provision for Deferred Tax Net Profit After Deferred Tax

0.00 (13.28) 0.00 (13.28)

0.00 (14.37) 0.00 (14.37)

0.00 (40.26) 0.00 (40.26)

7.6 Television Eighteen India Limited:

Consolidated Unaudited Financial Performance for the Quarter ended 30th September 2009

Part IV: Infomedia18

Rs. mn. Particulars Q2 2009-10 Q1 2009-10 Q2 2008-09

REVENUES: OPERATIONS

353.72

288.12

290.48

Operating Expense Operating Profit

415.10 (61.38)

310.09 (21.97)

299.62 (9.14)

Interest/Income from Investments Interest Expense Interest (Net) Depreciation

0.00 (27.38) (27.38) (20.81)

0.11 (22.96) (22.86) (20.33)

4.69 (17.02) (12.33) (8.09)

Total Profit Before Tax, Minority Interest and ESOP Charge Out

(109.58)

(65.16)

(29.56)

93

Provision for Current Tax/FBT Profits After Tax (before minority interest) Minority Interest Profits After Tax and Minority interest ESOP Charge Out Profits After Tax and ESOP Charge Out Exchange Fluctuations Profits After Exchange Fluctuations Provision for Deferred Tax Net Profit after Deferred Tax

(5.29) (104.29) (66.38) (37.90) 2.33 (40.24) 10.81 (51.05) 0.00 (51.05)

6.14 (71.30) 0.00 (71.30) 0.00 (71.30) (49.28) (22.02) 1.65 (23.67)

0.63 (30.19) (29.09) (1.11) 0.00 (1.11) 0.00 (1.11) 29.79 (30.89)

7.7 Television Eighteen India Limited:

Groups Consolidated Unaudited Financial Performance for the Quarter ended 30th September 2009

Particulars

Q2 2009-10

Q2 2008-09

Q1 200910

REVENUES

1240.11

1302.59

1073.26

Operating Expense Operating Profit Operating Margin

1250.53 (10.42) -0.84%

1209.25 93.34 7.17%

1035.93 37.33 3.48%

Net Outflow on Revenue Share with CNBC Interest/Income from Investments Interest Expense Interest (Net) Depreciation

(35.06) 35.88 (327.32) (291.44) (125.80)

(45.04) 134.03 (251.87) (117.85) (115.25)

(36.83) 37.32 (317.33) (280.01) (122.48)

Total Profit Before Tax, Minority Interest and ESOP Charge Out

(462.71)

(184.80)

(401.98)

Prior period income/(expense) Total Profit Before Tax, Minority Interest, ESOP Charge Out but After Prior period income/(expense)

(8.33)

0.00

0.00

(471.04)

(184.80)

(401.98)

95

Provision for Current Tax/FBT Profits After Tax (before minority interest and ESOP charge out)

(7.47)

30.23

14.37

(463.57)

(215.03)

(416.35)

Minority Interest Share in Loss of associates (ibn18 Broadcast Ltd.) Profits After Tax and Minority Interest (before ESOP charge out)

(65.11) (165.29)

(39.12) 0.00

(2.33) 11.83

(563.74)

(175.91)

(402.19)

ESOP Charge Out Profits After Tax and ESOP Charge Out Exchange Fluctuations Profits After Exchange Fluctuations Provision for Deferred Tax Net Profit After Deferred Tax Paid up Equity Share Capital EPS (Rs.) without ESOP Charge Out EPS (Rs.) with ESOP Charge Out

7.04 (570.78) 60.45 (631.23) 29.79 (661.02) 600.07 (5.45) (5.51)

35.80 (211.71) 34.01 (245.72) 29.79 (275.51) 598.42 (1.75) (2.30)

10.82 (413.00) (19.08) (393.92) 12.71 (406.64) 600.07 (3.30) (3.39)

ibn18 Broadcast Limited Unaudited Consolidated Financial Performance for the Quarter ended 30th September 2009 (Rs. lakhs.)
ibn18 Standalone For the qtr Jul-Sep'09 100% INCOME a. b. Income from Operations Other income TOTAL 4,015.61 68.96 4,084.57 9,478.72 30.93 9,509.64 127.51 0.03 127.54 13,613.65 99.95 13,713.60 Viacom18 For the qtr Jul-Sep'09 50% (See Note 1) ibnlokmat For the qtr Jul-Sep'09 50% ibn18 Consolidated For the qtr Jul-Sep'09

EXPENDITURE Production, administrative and other costs Personnel expenses TOTAL

a.

3,986.32

10,323.11

193.56

14,494.69

b.

1,759.23 5,745.55

997.84 11,320.95

103.52 297.07

2,860.58 17,355.27

97

EBITDA

(1,660.98)

(1,811.31)

(169.53)

(3,641.67)

c. d.

Interest and financial charges Depreciation TOTAL

1,005.85 351.60 1,357.45

92.03 93.54 185.58

47.28 55.19 102.47

1,145.16 500.46 1,645.62

PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS

(3,018.43)

(1,996.88)

(272.00)

(5,287.29)

Exceptional expense (Impairment of ibn18 M)

2,967.41

2,967.41

Profit/(Loss) before tax & ESOP Provision for taxes (Fringe benefit tax) ESOP Cost Profit/(Loss) after tax (PAT)

(5,985.84)

(1,996.88)

(272.00)

(8,254.70)

(49.50) 50.29 (5,986.63)

(18.65) (1,978.23)

(272.00)

(68.15) 50.29 (8,236.84)

Viacom18 Unaudited Financial Performance for the Quarter ended 30th September 2009
For the period

(Rs. lakhs.)

Jul-Sep'09

INCOME a. b. Income from Operations Other income TOTAL 19,946.34 65.08 20,011.42

EXPENDITURE

a. b.

Production, administrative and other costs Personnel expenses TOTAL

21,723.23 2,099.78 23,823.00

EBITDA

(3,811.58)

c. d.

Interest and financial charges Depreciation TOTAL

193.67 196.84 390.52

Profit/(Loss) before tax & ESOP Provision for taxes (Fringe benefit tax) Profit/(Loss) after tax carried to balance sheet

(4,202.10) (39.25) (4,162.85)

99

Unaudited Standalone Financial Performance for the Quarter ended 30th September 2009 (Rs. lakhs.)
ibn18 (CNN IBN + IBN7) For the quarter Jul-Sep'09 INCOME a. b. Income from News operations Other income TOTAL 4,015.61 68.96 4,084.57 4,558.02 86.74 4,644.76 ibn18 (CNN IBN + IBN7) For the quarter Jul-Sep'08

EXPENDITURE a. b. Production, administrative and other costs Personnel expenses TOTAL 3,986.32 1,759.23 5,745.55 3,855.99 1,769.68 5,625.67

EBITDA

(1,660.98)

(980.91)

c. d.

Interest and financial charges Depreciation TOTAL

1,005.85 351.60 1,357.45

378.48 328.90 707.39

Profit Before Tax And Exceptional Items

(3,018.43)

(1,688.29)

Exceptional expense (Impairment of ibn18 M)

2,967.41

Profit/(Loss) before tax & ESOP Provision for taxes (Fringe benefit tax) ESOP Cost Profit/(Loss) after tax carried to balance sheet

(5,985.84) (49.50) 50.29 (5,986.63)

(1,688.29) 53.13 16.20 (1,757.63)

Notes: 1. Figures for Jagran TV added to Q2 2008-09 ibn18 standalone figures to make it comparable with Q2 2009-10 standalone 2. Exceptional Expense: Represents amount of Option Premium paid by ibn18 through its wholly owned subsidiary which has been written off as an impairment

101

IBN Lokmat Unaudited Financial Performance for the Quarter ended 30th September 2009 (Rs. lakhs.)
For the period Jul-Sep'09 INCOME a. b. Income from News Operations Other income TOTAL 255.02 0.06 255.08 60.64 1.56 62.21 For the period Jul-Sep'08

EXPENDITURE a. b. Production, administrative and other costs Personnel expenses TOTAL 387.11 207.03 594.15 616.72 247.20 863.92

EBITDA

(339.07)

(801.71)

c. d.

Interest and financial charges Depreciation TOTAL

94.56 110.38 204.94

65.88 92.19 158.07

Profit/(Loss) before tax & ESOP Provision for taxes (Fringe benefit tax) Profit/(Loss) after tax carried to balance sheet

(544.01) (544.01)

(959.78) 4.86 (964.64)

Following the meeting of the of the Board of Directors, RaghavBahl, Network18s Managing Director said: We are happy to report a sequential and year-on-year growth in revenues on a consolidated basis at Network18 level. In fact, Network18 has posted strong topline growth through the challenging environment of the previous quarters. We remain committed to keeping our revenues buoyant, while cutting down our operating losses, and maintaining leadership positions across Entertainment, News Channels, Internet, Print, News Terminals, Directories and Events & Sports management. A successful equity raising of Rs 750cr+, at the parent level and across group properties in the last few months, will help us bring down interest costs and sustain a healthy debt level thereafter. We believe that the environment has once again turned conducive for business and we should share better financials in the remaining year.

103