MBA Programme

INTRODUCTION
FINANCIAL MANAGEMENT:
Financial management is a process of identification, accumulation, analysis,
preparation, interpretation communication of financial information and
communication of financial information to plan, evaluate, and control business
firms.
Financial management is the specialized function of general management,
which, is relates to the procurement of finance, and its effective utilization for the
achievement of the goal of the organization.
MEANING:
Financial Management is an organizational activity that is concerned with
the management of financial resources. In common parlance is described as
providing monetary resources at the time they are required. But financial
management covers the mobilization and effective utilization of funds.
DEFINITIONS:
1. Financial Management is defined as that business activity which is
concerned with the acquisition and conservation of capital funds in meeting
the financial needs and overall objectives of business enterprises
- WHEELER.
2. Business finance can be broadly defined as the activity concerned with the
planning, raising, controlling and administrating the funds used in the
business.
- GUTHMANN AND DOUGALL.

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3. Finance Management is concerned with the efficient use of an important

economic resource, namely capital funds.

- SOLOMON.
4. Financial management is an area of financial decision making harmonizing
individual motives and enterprises goals.
-WESTON & BRIGHAN.
Financial management is concerned with the effective use of an economic
resource namely capital fund.
SCOPE OF FINANCIAL MANAGEMENT:
Financial management is a branch of business management, which is
associated with future planning, Organization, co-ordination and control.
Financial management provides a sound base to all managerial decisions.
Production, research and development decisions based on financial
management.
Financial management is a scientific and analytical analysis.
In the process of decision making and financial analysis modern
mathematical techniques are used. Managing a firm is both science and an
art.
An analysis of the various definitions mentioned above make it clear that
financial management is concerned with the proper management of funds
keeping in view the enterprise objectives.

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The financial manager should look after that the funds are procured in a
manner that the risk and cost consideration are properly balanced and there
is optimum utilization of funds.

OBJECTIVES OF FINANCIAL MANAGEMENT:

Financial decisions can be making keeping in view the basic objective of
maximization of owners economic welfare. It can be achieved through two widely
accepted criteria.
PROFIT MAXIMISATION:
The efficiency of the firm is measured through the volume of profits earned
by it. It means maximizing the rupee income of the firm. Profit maximization
objective may be started in terms of return on investment or profit - to - sales
ratios. This would help in profitable utilization of societys economic resources,
since the financial manager is responsible for the efficient utilization of resources,
increasing of revenues, controlling costs, Minimizing risks.
WEALTH MAXIMISATION:
Wealth maximization objective is a widely recognized criterion with which
the performance of business enterprise is valued. The wordwealth refers to the
net present worth of the firm. The net present worth is the difference between gross
present worth and the amount of capital investment required to achieve the
benefits. Gross present worth represents the present value of expected cash flows
(benefits) discounted at a rate.

IMPORTANCE OF FINANCIAL MANAGEMENT:

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Finance is very essential for the smooth running of the business. It has been
rightly termed as universal lubricant, which keeps the enterprise dynamic. It is
indispensable in any organization as it helps in;
(1) Financial planning and successful promotion of an enterprise;
(2) Acquisition of funds as and when required at the minimum possible cost;
(3) Proper use and allocation of funds;
(4) Taking sound financial decisions;
(5) Improving the profitability through financial controls;
(6) Increasing the wealth of the investors and the nation; and
(7) Promoting and mobilizing individual and corporate savings.
In financial accounting, a cash flow statement, also known as statement
of cash flows or funds flow statement, is a financial statement that shows how
changes in balance sheet accounts and income affect cash and cash equivalents,
and breaks the analysis down to operating, investing, and financing activities.
Essentially, the cash flow statement is concerned with the flow of cash in and cash
out of the business. The statement captures both the current operating results and
the accompanying changes in the balance sheet As an analytical tool, the statement
of cash flows is useful in determining the short-term viability of a company,
particularly its ability to pay bills. International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements.

People and groups interested in cash flow statements include:

Accounting personnel, who need to know whether the organization will be

able to cover payroll and other immediate expenses

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Potential lenders or creditors, who want a clear picture of a company's

ability to repay

Potential investors, who need to judge whether the company is financially

sound

Potential employees or contractors, who need to know whether the company

will be able to afford compensation

Shareholders of the business.

PURPOSE
The cash flow statement was previously known as the flow of funds statement. The
cash flow statement reflects a firm's liquidity.
The balance sheet is a snapshot of a firm's financial resources and obligations at a
single point in time, and the income statement summarizes a firm's financial
transactions over an interval of time. These two financial statements reflect the
accrual basis accounting used by firms to match revenues with the expenses
associated with generating those revenues. The cash flow statement includes only
inflows and outflows of cash and cash equivalents; it excludes transactions that do
not directly affect cash receipts and payments. These noncash transactions include
depreciation or write-offs on bad debts or credit losses to name a few. The cash
flow statement is a cash basis report on three types of financial activities: operating
activities, investing activities, and financing activities. Noncash activities are
usually reported in footnotes.
The cash flow statement is intended to provide information on a firm's liquidity
and solvency and its ability to change cash flows in future circumstances

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1. provide additional information for evaluating changes in assets, liabilities

and equity
2. improve the comparability of different firms' operating performance by
eliminating the effects of different accounting methods
3. indicate the amount, timing and probability of future cash flows
The cash flow statement has been adopted as a standard financial statement
because it eliminates allocations, which might be derived from different accounting
methods, such as various timeframes for depreciating fixed assets.
Financial Analysis:Financial Analysis are prepared primarily for decision making. They play a
dominant role in setting the frame work of managerial decision. But the
information provided in the financial Analysis is not an end in itself as no
meaningful conclusions can be drawn from these Analysis alone. However, the
information provided in the financial Analysis is of immense use in making
decisions through analysis and interpretation of financial Analysis.
Financial analysis is the process of identifying the financial strengths and
weakness of the firm by properly establishing relationship between the items of the
balance sheet and the profit and loss amount. There are various methods or
techniques used in analyzing financial Analysis, such as comparative Analysis,
trend analysis, common-size Analysis, schedule of changes in working capital,
funds flow and analysis, cost volume profit analysis and ratio analysis.
Meaning and Concept of Financial Analysis:The term financial analysis also known as analysis and interpretation of
financial Analysis, refers to the process of determine financial strengths and
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weakness of the firm by establishing strategic relationship between the items of the
balance sheet, profit and loss account and oilier operative data. Analyzing
financial Analysis,
According to Metcalf and Titard. Is a process of evaluating the
relationship between component parts of financial statement to obtain a better
understanding of a firms position and performance? In the words of Myers,
Financial statement Analysis is largely a study of relationship among the various
financial factors in a business as disclosed by a single set of Analysis, and study
of the trend of these(actors as shown in a series of Analysis.)
The purpose of financial analysis is to diagnose the information contained in
financial Analysis so as to judge the profitability and financial soundness of the
firm, just like a doctor examines ills patient by recording his body temperature,
blood treatment, a financial analyst analysis the financial Analysis with various
tools of analysis before commenting upon the financial health or weakness of an
enterprise. The analysis and interpretation of financial Analysis is essential to bring
out the mystery behind the figures in financial Analysis. Financial Analysis
analysis is an attempt to determine the significance and meaning of the financial
statement data so that forecast may be made of the future earnings, ability to pay
interest and debt maturities (both current and long-term) and profitability of a
sound dividend policy.

Finance & Functions:

Initially the finance managers were considered advent of an event requiring
funds. The finance manager was given a target amount of funds to raise and was
given a target amount of funds to raise and was given the responsibility of

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procuring those funds. So his function was limited to raising funds as and when the
need arise. Once the funds were procured, his function was over

However, over a period the scope of his function has tremendously widened.
His presence is required at every moment whenever any decision having
involvement of funds is to he taken. Now it is the F.M require looking into the
financial implication, of any decision in the firm.
The functions of F.M are to manage the funds. Any act , procedures, decision
relating to funds comes under the purview of the F.M. since every activity in the
business organization, be it purchases , production .marketing or capital
expenditure has a financial implication, the finance function is interlinked with all
other areas. In particular, the F.M has to focus his attention on:
1. Procurement the required quantum of funds as and when necessary, at the
lowest cost.
2. Investing those funds in various assets in the most profitable way, and
3. Distribute returns to the shareholders in order to satisfy their expectations
from the firm.
The FM is usually faces with the following distinct scenario
1. What should be the size of a firm and how fast should it grow?
2. What are the various types of assets to be acquired? (Investment decision)
3. What should be the pattern of raising funds from various sources? (Financing
decision)

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Financial Analysis:A financial statement is a collection of data organized according logical

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 a moment in
time, as in the case of an income statement, thus the term financial Analysis
generally refers to the two Analysis: (I) the position statement or the balance sheet,
and (ii) the income statement or the profit and loss account. These Analysis are
used to convey to management and other interested outsiders the profitability and
financial position to a firm.
Financial Analysis are the outcome of summarizing process of accounting.
In the words of John N. Her, the financial Analysis provide a summary of the
accounts of a business enterprise, the balance sheet reflecting the asset, liabilities
and capital as on a certain date and the income statement showing the results of
operations during a certain period. Financial Analysis are prepared as an end result
of financial accounting and are the major sources of financial information of an
enterprise Smith and Asburne define financial Analysis as. The product of financial
accounting in asset of financial Analysis 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.
Financial Analysis are also called financial reports. In the words of Anthony,
financial Analysis, essentially, are interim reports, presented annually and reflect a
division of the life of an enterprise onto more or less arbitrary accounting periodmore frequently a year.

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Objectives of Financial Analysis:Financial Analysis are the sources of information on the basis of which conclusions
are drawn about the profitability and financial position of a concern. they are the
major means employed by firms to present their financial situation of owners,
creditors and the general public, the primary objective of financial Analysis is to
assist in decision making,. The accounting principles board of America (APB)
sates the following objectives of financial Analysis.
1. To provide reliable financial information about economic resources and
obligations of a business firm.
2. To provide other needed information about changes in such economic
resources and obligations.
3. To provide reliable information about changes in net resources (resources less
obligations) arising out of business activities.
4. To provide financial information that assists in estimating the earning
potentials of business.
5. To disclose, to the extent possible, other information related to the financial
Analysis that is relevant to the needs of the users of these Analysis.
Types of Financial Analysis:Financial Analysis primarily comprise two basic Analysis: (1) the position
statement or the balance sheet and (2) the income statement or the profit and loss
account. However, (Generally Accepted Accounting Principles (GAAP) specifies
that a complete set of financial Analysis must include:
(1). A Balance Sheet.
(2). an Income Statement (Profit and Loss Account).
(3). A Statement of Changes in Financial Position.
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1. Balance Sheet:The America institute of certified public accountants defines balance sheet
as. A tabular statement of summary of balances (debits and credits) carried forward
after an actual and constructive closing of books of account and kept according to
principles of accounting. The purpose of the balance sheet is to show the
resources that the company has, i.e. its assets, and from where those resources
come from i.e., its liabilities and investments by owners and outsiders.
The balance sheet is one of the important Analysis depicting the financial
strength of the concern. It shows on the one hand the properties that it utilizes and
on other hand the sources of those properties. The balance sheet shows all the
assets owned by the concern and all the liabilities and claims it owes to owners and
outsiders.
2. Income Statement (or) Profit and Loss Account:Income statement is prepared to determine the operational position of the
concern. It is a statement of revenues earned and the expenses incurred for earning
that revenue, if there is excess of revenues over expenditures it will show a profit
and if the expenditures are more than the income then there will be a loss. The
income statement is prepared for a particular period, generally a year. When
income statement is prepared for the year ending, then all revenues and
expenditures falling due in that year will be taken into account irrespective of their
receipt or payment.
The income statement may be prepared in the form of a manufacturing
account to find out the cost of production, in the form of trading account to
determine gross profit or gross loss. In the form of a profit and loss account
determine net profit or net loss, a statement of retained earnings may also be
prepared to show the distribution of profits.
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3. Statement of Changes in Owners Equity (Retained Equity):The term owners equity refers to the claims of the owners of the business
shareholders against the assets or the firm. It consists of two elements (1) paid-up
share capital, I.e. the initial amount of funds invested by the shareholders and (2)
retained earnings/reserves and surplus representing undistributed profits. The
statement of changes in owners equity simply shows the beginning balance of
each owners equity account the reasons for increases and decreases in each, and
its ending balance. However in most cases, the only owners equity account that
changes significantly is retained earnings and hence the statement of changes in
owners equity becomes merely a statement of retained earnings.
A statement of retained earnings is also known as profit and loss
Appropriation Account or income Disposal Statement. As the name suggests it
shows appropriations of earnings. The previous years balance is first brought
toward. The net profit during the current year is added to this balance. On the debt
side, appropriations like interim dividends paid. Proposed dividend in preference
and equity share capital, amounts transferred to debenture redemption fund, capital
redemption funds. General reserves etc are shown. The balance in tills account will
show this amount of profit retained in hand and carried forward. The
appropriations cannot lie more than the profits so this account will not have a debit
balance. There cannot be appropriations without profits.
4. Statement of Changes in Financial Position:The basic financial Analysis, I.e., the balance sheet and the profit and loss
account or income statement of a business reveal the net effect of the various
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transactions on the operational and financial position of the company. The balance
sheet gives a static view of the resources of a business and the uses to which these
resources have been put at a certain point of time. The profit and loss account in a
general way. Indicates the resources provided by operations. But there are many
transactions that do not operate through profit and loss account. Thus, for a better
understanding another statement called statement of changes in financial position
has to be prepared show the changes in assets and liabilities from the end of one
period to the end of another point of time. The objective of this statement is to
showing the movement of funds (working capital or cash) during a particular
period. The statement to changes in financial position may take any of the
following two forms.
(a) Funds Flow Statement:-The funds flow Analysis is designed to analyze the
changes in the financial conditions of a business enterprise between two periods.
The word fund is used to denote working capital.
This statement will show the sources from which the funds are received and the
uses which these have been put. I his statement enable the management to have an
idea about the sources of funds and their uses for various purposes. I ills statement
helps the management in policy formulation and performance appraisal.
(b) Cash Flow Analysis:-a statement of changes in the financial position of a firm
on cash basis is called cash flow statement. It summarizes the causes of changes in
sash position of a lousiness enterprise between states of two balances sheets. This
statement is very much similar to the statement of changes in working capital I.e.,
funds flow statement. A cash flow statement focuses attention on cash changes
only.

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Characteristics of Ideal Financial Analysis:The financial Analysis are prepared with a view to depict financial position
of the concern. A proper analysis and interpretation of these Analysis enables a
person to judge the profitability and financial strength of the business. The
financial Analysis should be prepared in such away that they are able to give a
clear and orderly picture of the concern. The ideal financial Analysis have the
following characteristics.
1. Depict True Financial Position:The information contained in the financial Analysis should be such that a true and
correct idea is taken about the financial position of the concern. No material
information should be with held while preparing position of the concern. No
material information should be with held while preparing these Analysis.
2. Effective Presentation:The financial Analysis should be presented in a simple and lucid way so as to
make them easily understandable. A person who is not well versed with accounting
terminology should also be able to understand the Analysis without much
difficulty. This characteristic will enhance the utility of these Analysis.
3. Relevance: Financial Analysis should be relevant to the objectives of the enterprises. This will
be possible when the person preparing these Analysis is able to properly utilize the
accounting information. The information which is not relevant to the Analysis
should be avoided; otherwise it will be difficult to make a distinction between
relevant and irrelevant data.

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4. Attractive:The financial Analysis should be prepared in such a way that important

information is underlined so that it attracts the eye of the reader.

5.Easiness:Financial Analysis should be easily prepared. The balances of different ledger

accounts should be easily taken to these Analysis. The calculation work should be
minimum possible while preparing these Analysis. The size of the Analysis should
not be very large. The columns to be used for gibing the information should also be
less. This will enable the saving of time in preparing the Analysis.
6. Comparability:The results of financial analysis should be in a way that can be compared to the
previous years Analysis. The statement can also be in compared with the figures
of other concerns of the same nature. Sometimes budgeted figures are given along
with the present figures. The comparable figures will make the Analysis more
useful. The Indian companies Act. 1956 has made it obligatory to give previous
years figures in the balance sheet. The comparison of figures will enable a proper
assessment for the working of the concern

7. Analytical representation:The information should be analyzed in such a way that similar date is presented at
the same place. A relationship can be established in similar type of information.
This will be helpful in analysis and interpretation.

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8. Brief:If possible, the financial Analysis should be presented in brief. The reader will be
able to form an idea about the figures. On the other hand, it figures are given in
details then it will become difficult to judge the working of the business.

9. Promptness:The financial Analysis should be prepared and presented at the earliest possible.
Immediately at the close of the financial year, Analysis should be ready.
Limitations of Financial Analysis:Though financial Analysis are relevant and useful for the concern, still they
do not present a final picture of the concern. The utility of these Analysis is
dependent upon a number of factors. The analysis and interpretation of these
Analysis should be done very carefully otherwise misleading conclusions may be
drawn; the financial Analysis suffer from the following limitations:
1. Only interim reports:These Analysis don not give a final picture of the concern. The data given
in these Analysis is only approximate. The actual position can only be determined
when the business is sold or liquidated. However, the Analysis have to be prepared
for different accounting periods, generally one year, during the life time of the
concern. The costs and incomes are apportioned to different periods with a view to
determine profits etc. the allocation of expenses and incomes will depend upon the
personal judgment of the accountant. The existence of cotangent assets and
liabilities also makes the Analysis imprecise. So financial Analysis do not give the
final picture and they are the most interim reports.

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2. Do not give exact position:The financial Analysis are expressed in momentary values so they appear
to give final and accurate position. The value of fixed assets in the balance sheet
neither represents the value for which fixed assets can be sold nor did the amount,
which will lie, require replacing these assets. The balance sheet is prepared on the
presumption of a going concern. The concern is expected to continue in the figure.
So fixed assets are shown all cost less accumulated depreciation. There are certain
assets in the balance sheet such as preliminary expenses, goodwill, discount on
issue of shares which will realize nothing at the time of liquidation through they
are shown in the balance sheet.
3. Historical Costs:The financial Analysis are prepared on the basis of historical costs or
original costs. The value of assets decreases with the passage of time current price
changes are not taken into account. The Analysis are not prepared keeping in view
the present economic conditions. The balance sheet losses the significance of being
an index of current economic realities. Similarly, the profitability shown by the
income statement may not represent the earning capacity of the concern. The
increase I profits may be due to an increase in prices or due to sonic abnormal
causes and not due to increase in efficiency. The conclusions drawn from financial
Analysis may not give a lair picture of the concern.
4. Impact of Non-Monetary Factors Ignored:There are certain f actors which have a bearing on the financial position
and operating results of the business but they do not become a pan of these
statement s because they cannot be measured I monetary terms. Such factors may
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include the reputations of the management, credit worthiness of the concern,

sources and commitments for purchases and sales, co-operation of the employees,
etc. The financial Analysis only show the position of the financial accounting for
business and not the financial position.

5. No Precision:The precision of financial statement data is not possible because the

statement deal with matters which cannot be precisely stated. The data are recorded
by convention procedure is followed over the years. Various conventions,
postulates personal judgments etc, are used for developing the data.

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CASH FLOW STATEMENT

Cash flow is the movement of cash into or out of a business, project, or financial
product. (Note that the word cash is used here in the broader sense, where it includes
bank deposits.) It is usually measured during a specified, finite period of time.
Measurement of cash flow can be used for calculating other parameters that give
information on the companies' value and situation. Cash flow can e.g. be used for
calculating parameters:

To determine a project's rate of return or value. The time of cash flows into and out
of projects are used as inputs in financial models such as internal rate of return,
and net present value.

To determine problems with a business's liquidity. Being profitable does not

necessarily mean being liquid. A company can fail because of a shortage of cash,
even while profitable.

Cash flow can be used to evaluate the 'quality' of Income generated by accrual
accounting. When Net Income is composed of large non-cash items it is
considered low quality.

To evaluate the risks within a financial product, e.g. matching cash requirements,
evaluating default risk, re-investment requirements, etc.

Cash flow is a generic term used differently depending on the context. Users may define
it for their own purposes. It can refer to the total of all the flows involved or to only a
subset of those flows. Subset terms include 'net cash flow', operating cash flow and free
cash flow.
In finance accounting a cash flow statement is financial statement that shows a
company flow of cash. The money coming into the business is called cash flow and
money going out from the business is called cash outflow.

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Meaning:
Cash flow signifies the movements of cash in and out of a business concern.
While the inflow of cash is a source of cash the outflow of cash is a use of cash.

Utility of cash flow statement:

Cash flow statement is highly useful for the evaluation of the cash position of the
concerns it is based on the cash basis of accounting.
Cash flow statement is highly useful and appropriate for short-term financial
planning.
Cash flow statement helps for making appraisal of various capital investments
projects just to determine their viability and profitability.
It is used to explain the anomaly of substantial profits and poor cash position.

Types of cash flow:

While preparing a cash flow statement, two types of cash flows viz., actual cash
flow and national cash flow are identified. Actual cash flow refers to the actual
movements of cash into or out of business. Purchase of fixed assets, borrowing from bank
of financial institutions, trading profits and redemption of debentures are all examples of
actual cash flows. But national cash flows result s only in the cash of increase or decrease
in current assets. National cash flow result indirect cash movements into or out of
business. For example, increase in balance of debtors does not result in any actual cash
outflow since it is part of credit sales. But form of material cost, labor cost, overheads
etc., locked up in the goods sold on credit.

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Sources of cash flow:

Issue of shares and debentures for cash.
Disposal of fixed assets and investment for cash.
Borrowing form banks and other financial institutions.
Cash from operations or trading profit.
Decrease in current assets.
Increase in current liabilities.
For example, credit sales of goods involve creation of assets in the form of debtors
and bills receivable. When payment is receive (cash inflow) from the customer, there will
be a reduction of current assets (debtors and bills).
Thus decrease in current assets involves cash inflows. For example, purchase of
goods on credit results in creation of current liabilities in the form of creditors and bills
payable. Here it is assumed that the creditors have given loan cash (National Cash
Inflow), which has been used to acquire the goods.
Applications of cash:
Redemption of shares and debentures by cash
Purchase of fixed assets and investment by cash
Repayment of Loans
Increase in Current assets

Classifications of cash flows:

Cash flow from operating activities:
Cash flow from financing activities.
Cash flow from investing activities

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Cash flow from operating activities:

Operating activities are the principal revenue producing activities of enterprise
and other activities that are not investing or financing activities.
The amount of cash flows arising from operating activities is a key indicator of the
extend to which the operations of the enterprise have generated sufficient cash flows to
maintain the operating g capability of the enterprise, pay dividends, re pay loans, and
make new investment with out recourse to the external sources of financing.

The importance of the cash flow statement:

Lets take a moment to catch our breath in the discussion of the cash flow
statement, and look at all the information weve absorbed so far and the importance of the
cash flow statement in fulfilling the financial picture for the state of a business.
The Statement of Cash Flows is the new kid on the block as a member of the
Financial Statement set. This wasnt a required piece of the financial statement set until
1988. As a result, there are still some areas that need fine-tuning; such as the format used
to report the cash flows.
The Statement of Cash Flows is the final document prepared in the Financial
Report set, and provides information that is a direct flow of information from the Income
Statement, Owner Equity Statement and Balance Sheet; therefore, this report adds
validity and accountability to the Financial Statements.
Analysts, investors, stockholders, potential investors and lenders use these reports
in order to assess the financial health of a business.

Therefore, it is tremendously

advantageous to use the standard method for generating the Statement of Cash Flows and
provide the additional credibility to the financial information.

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There are 3 major categories for the information that is reported on the Statement
of Cash Flows and they are operating activities, investing activities, and financing
activities. Between the three major areas, every aspect of a business transactions is
covered. The resulting totals on this report are direct flows of financial information totals
from the other 3 reports in the financial statement set. The only variance in reporting is
in the operating activity area, concerning the cash transactions. A business may choose to
use an indirect or direct method for reporting cash transactions. If a business chooses to
use the direct method, there must also be a schedule attached that is basically also the
indirect method in order to reconcile the information given in the direct method.
When we read the Statement of Cash Flows there are some basic numbers that will
help you to assess a business; they are:

Net earnings or profit and loss information

Depreciation expense

Changes in inventory

Changes in accounts receivable

Changes in accounts payable

Changes in the net cash from financing activities that doesnt reflect equipment
or building additions.
A general knowledge and good grasp of these Financial Statements, especially

the Statement of Cash Flows will provide volumes of information to the reader, and if
youre a potential investor or lender, you cannot know enough about a business before
placing your money or that of your depositors in the operations of that business.

Limitations of cash flows:

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Cash flow statement is not suitable for judging the profitability of a

firm as

non-cash changes ignored while calculating cash flows from operating

activities.
Cash flow statement is based on cash accounting. It ignores the basic
accounting concept of accrual basis.
Cash flow statement does not give a complete picture of financial position of
concern.
Cash flow statement reveals the movement of cash only. In the preparation
ignores most liquid current asset.

Funds flow Vs cash flow statement:

Both are used in analysis of past transactions of a business firms. the major
differences

are:

(1) Funds Flow Statement is concerned with all items constituting funds
(Working Capital)for the business while Cash Flow Statement deals only with cash
transactions. In other words, a transaction affecting working capital other than cash
will

affect

Funds

statement,

and

not

the

Cash

Flow

Statement.

(2) In Funds Flow Statement, net increase or decrease in working capital is recorded
while in Cash Flow Statement, individual item involving cash is taken
(3) Funds Flow statement is started with the opening cash balance and closed with the
closing

cash

balance

records

only

cash

transactions.

(4) Cash Flow Statement is started with the opening cash balance and closed with ht
closing cash balance while there a no opening or closing balances in Funds Flow
Statement.
(5) A fund flow statement is based on the accrual accounting system. in case of
preparation of cash flow statements all transactions effecting the cash or cash
equivalents is only taken into consideration.

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(6) Fund flow statement analyses the source and application of long term nature of
the net increase and decrease of fund. The cash flow statement considers the increase
and

decrease

of

current

assets

and

current

liabilities.

(7) Fund flow statements tallies the fund generated from various sources with
variable uses to which they are put.

The following are the important operating activities:

Cash receipts from sale of goods and the rendering of services.
Cash receipts from royalties, fees, commissions and other revenue.
Cash payment to suppliers for goods and services.
Cash payment to and on behalf of employees.
Cash receipts and policy cash payments of an insurance enterprise for premiums
and claims, annuities and other benefits.
Cash flow from investing activities:
Investing activities are the acquisition and disposal of along term assets and
other investments not included in cash equivalents. The separate disclosure of cash flows
arising from investing activities is important because the cash flows represent the extend
of which expenditure have been made for resources intended to generate future income
and cash flows.
Examples of cash flows arising from investing activities are:
Cash payments to acquire fixed assets. The payments include those relating to
capitalized research and development cost and self constructed fixed assets.
Cash payment to acquire shares, warrants, or debit instruments of other
enterprises and interests in joint venture.
Cash receipts from the repayment of advances and loans made to third parties.

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Cash receipts from disposal of fixed assets.

Cash flow from financing activities:

Financing activities are that result in changes in the size and composition of the
owners capital and borrowing of enterprise.
The separate disclosure of cash flows arising from financing activities is
important because it is useful in predicting the claims on future cash flows by provides of
funds to the enterprise.
Examples of cash flow arising from financing activities are:
Cash proceeds from issuing shares or other similar instruments.
Cash proceeds from issuing debentures, loans, notes, bonds and other short term
borrowings and
Cash repayment of amounts borrowed such as redemption of debentures, bonds,
and preference shares.

Methods of calculating cash flows:

There are two methods of reporting cash flows from operating activities namely
Direct method.
Indirect method.
The Direct method:
Under this method, cash inflows from operating revenues and cash payments for
operating expenses are calculated to arrive at cash flows from operating activities. The

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difference between the cash receipts and cash payments is the net cash flow provided by
operating activities.
The formation about major class of goods cash receipts and goods cash payments may be
obtained either:
From accounting records of the enterprise; or
By adjusting sales, cost of sales and other items in the statement of profit and loss
for;
Changes during the period in inventories and operating receivables and payables.
Other non-cash items. Other items for which the cash effects are investing or
financing cash flows
The Indirect method:
Under the indirect method, the net cash flow from operating activities is
determined by adjusting net profit or loss for the effect of:
Non cash items such as depreciation, provisions, differed taxes, and un realized
foreign exchange gains and losses; and
Changes during the period in inventories and operating receivables and payables.
All other items for which the cash effects are investing or financing cash flows.
The indirect method also called reconciliation method as it involves reconciliation
of net profit or loss as given in the profit and loss account and the net cash flow from
operating activities shown in the cash flow statement.

Uses of cash flow statement:

Cash flow statement reveals the causes of changes in cash between two
balance sheet dates.

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Cash flow statement helps the management in planning repayment of loans,

replacement of assets etc.

It helps the management in understanding the past behaviour of cash cycle

and controlling the use of cash in future.

This statement helps short-term financial decisions relating to liquidity.

Sources of cash:

Issue of shares and debentures for cash.

Disposal of fixed assets and investment for cash.

Cash from operations or trading profit.

Decrease in current assets.

Increase in current liabilities.

Format of cash flow statement:

The three activities discussed in preceding paragraphs constitute the general
format of the statement of cash flows. The cash flows from operating activities section
always appears first, followed by the investing section and then financing activities
section. The individual inflows and outflows from investing and financing activities
are reported separately. That is, they are reported gross, not netted against one another.
Thus, cash outflows from the purchasing of property are reported separately from the
cash inflow the sale of property. Similarly, the cash inflow from the issuance of debt is
reported separately from the cash outflow from its retirement.

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Cash flow statement (for the year ended..)

Particulars

Rs.

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Cash flow from operating actives:
Cash receipts from customers

xxx

Cash paid to suppliers and employees

xxx

Cash generated from operations

xxx

Income tax paid

xxx

Cash flow before extraordinary items

xxx

Extra ordinary items

xxx

Net cash from operating activities

Xxx

(or)
Net profit before tax and extra ordinary items

xxx

Adjustment for non-cash and non-operating items.

(List of individual items such as depreciation,
foreign exchange loss, loss o sale of fixed assets,
interest income, interest expense etc.)

xxx

Operating profit before working capital changes

xxx

Adjustments for changes in current assets and

current liabilities
(List of individual items)

xxx

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Cash generated from operations before tax

xxx

Income tax paid

xxx

Cash flow before extraordinary items.

xxx

Extra ordinary items

xxx

Net cash from operating activities.

xxx
xxx

Cash flow from investing activities:

Individual items of cash inflows and out flows from

xxx

investing activities
Such as purchase and sale of fixed assets, purchase
or sale of investments, interest received, dividend

xxx

received etc.)
Net cash from investing activities.

xxx

Cash flow from financing activities:

Individual items of cash inflows and out flows from
financing activities

xxx

Such as purchase and sale of fixed assets, purchase

or sale of investments, interest received, dividend

xxx

received etc.)
Net increase/ decrease in cash and cash equivalents

xxx

Cash and cash equivalents beginning of the period

xxx

Cash and cash equivalents end of the period

xxx
xxx

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NEED FOR THE STUDY

Many business owners disregard the importance of cash flow statements because
they unwittingly believe that their current financial standing can be construed from
other financial reports and projections. Unfortunately, however, a cash flow
statement is necessary to adequately assess the incoming and outgoing flow of cash
and other resources in a business. Not only will a business owner with a cash flow
system be more aware of his or her financial standing, but it will also help
investors to make educated decisions on future investments. A business with
regular and reliable cash flow statements shows more economic solvency, and is
more attractive to investors.
A cash flow statement documents the incoming and outgoing cash in plain terms.
Future sales and sales made for credit (unless they have been paid off) are not
included in the cash flow statement, and most of the data will come from core
operations. Payables and receivables should be expressly defined, as should
depreciation of product value and inventory that has not yet been moved.
This will allow a business owner to compare past periods with the current financial
standing and determine whether your receivables have increased or decreased. This
can also help to track your investments next to your receivables and payables. Are
your investments increasing or decreasing in value? And has your inventory moved
at a steady pace? New or expanding businesses can expect to see a decrease in cash
flow, but this doesnt mean that the business is going under. More stables
businesses should see a steadily increase in cash flow over a period of several
months or years. There are typically five different sections in a cash flow
statement, though large businesses might have more complex cash flow systems as
required.

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SCOPE OF THE STUDY:

Since it will not be possible to conduct a micro level study of all Automobile
industries in Andhra Pradesh, the study is restricted to Sri Lalitha Parameswari
Spinning Mills Pvt Ltd . Only.

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OBJECTIVES OF THE STUDY

To know the flow of cash in the organization Sri Lalitha
Parameswari Spinning Mills Pvt Ltd .
To access the efficiency with sources and uses of cash were made by
the co ordinance the present year 2008-2009 to 2012-2013.
To identify the changes in the elements of focus and uses of working
capital in between above mentioned year.
To improve the financial performance of the company.

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METHODOLOGY OF STUDY
The following are the main sources of date used for this study which are
Collected and compiled from published and unpublished sources of the
Company data. The published sources are as follows.
1)

Management information system published by Sri Lalitha Parameswari

Spinning Mills Pvt Ltd .

2)

Status Report on Sri Lalitha Parameswari Spinning Mills Pvt Ltd .

3)

Journals, books and other published reports.

The present study is mainly based on primary and secondary sources of Data

collection. The primary data was directly collected by observations, Interviews

questionnaire etc.
The secondary data was collected from the literate available in libraries and
research studies and annual reports are related to the present study. It includes
published and unpublished literature like books, reports and generally Articles of
the Sri Lalitha Parameswari Spinning Mills Pvt Ltd .

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LIMITATIONS OF THE STUDY

The limitations of present study are as follows:
1. The study cover a period of FIVE years from 2008-09-2012-13
2. The study does not fund flow.
3. The study is based mainly on secondary information.
4. The study does not touch all the units of Sri Lalitha Parameswari
Spinning Mills Pvt Ltd .
5. The present study cannot be used for inter firm comparison.
6. Limited span of time is a major limitation for this project.
7. The act and figures of the study is limited to the period of FIVE years i.e.
2008-2012
8. The data used in reports are taken from the annual reports, published at the
end of the years.
9. The result does not reflect the day-to-day transactions.
10.It is also impossible to the study of day-to-day transactions in cash
management.
11.The analysis of the working capital is taken FIVE years.

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INDUSTRY PROFILE
INTRODUCTION
Cotton is a soft, staple fiber that grows around the seeds of the cotton
plant (Gossipier sp.), a shrub native to tropical and subtropical regions around
the world, including India and Africa. The fiber most often is spun into yarn
or thread and used to make soft, breathable cotton, which is the most widely,
used natural-fiber cloth in clothing today. The English name which began to
be used circa 1400, derives from the Arabic (al) quit, meaning cotton. In the
1800s and 1900s cotton was called "King Cotton" because of the great power
it had in the economy.
Cotton fiber, once it has been processed to remove seeds (ginning) and
traces of honeydew (a secretion from aphids), protein, vegetable matter, and
other impurities, consists of nearly pure cellulose, a natural polymer. Cotton
production is very efficient, in the sense that only ten percent or less of the
weight is lost in subsequent processing to convert the raw cotton bolls (seed
cases) into pure fiber. The cellulose is arranged in a way that gives cotton
fibers a high degree of strength, durability, and absorbency. Each fiber is
made up of twenty to thirty layers of cellulose coiled in a neat series of
natural springs. When the cotton bowl is opened, the fibers dry into flat,
twisted, ribbon-like shapes and become kinked together and interlocked. This
interlocked form is ideal for spinning into a fine yarn.
Cotton Cultivation:
Successful cultivation of cotton requires a long frost-free period, plenty
of sunshine, and a moderate rainfall, usually from 600 to 1200mm (24 to 48

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inches). Soils usually need to be fairly heavy, although the level of nutrients
does not need to be exceptional.
In general, these conditions are met within the seasonally dry tropics and
subtropics in the Northern and Southern hemispheres, but a large proportion of
the cotton grown today is cultivated in areas with less rainfall that obtain the
water from irrigation.
Production of the crop for a given year usually starts soon after
harvesting the preceding autumn. Planting time in spring in the Northern
hemisphere varies from the beginning of February to the beginning of June.
The area of the United States known as the South Plains is the largest
contiguous cotton-growing region in the world. It is heavily dependent on
irrigation water drawn from the Ogallala Aquifer.
Genetically modified cotton:
Genetically modified (GM) cotton was developed to reduce the heavy
reliance on pesticides. Genetically modified cotton is widely used throughout
the world with claims of requiring up to 80% less pesticide than ordinary
cotton as typically grown commercially. However, researchers have recently
published the first documented case of in-field pest resistance to GM cotton.
The International Service for the Acquisition of Agri-Biotech Applications
(ISAAA) said that, worldwide, GM cotton was planted on an area of 67,000
km in 2002. This is 20% of the worldwide total area planted in cotton. The
U.S. cotton crop was 73% GM in 2003.
The initial introduction of GM cotton proved to be a commercial disaster
in Australia - the yields were far lower than predicted, and the cotton plants
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were cross-pollinated with other varieties of cotton. However, the introduction

of a second variety of GM cotton led to 15% of Australian cotton being GM in
2003. 80% of the crop was genetically modified in 2004, when the original GM
variety was banned.
GM cotton acreage in India continues to grow at a rapid rate increasing
from 50,000 hectares in 2002 to 3.8 million hectares in 2006.
The total cotton area in India is about 9.0 million hectares (the largest in
the world or, about 25% of world cotton area) so GM cotton is now grown on
42% of the cotton area
HISTORY
Cotton plants as imagined and drawn by John Mandeville in the
fourteenth century Cotton cultivation in the Old World began from India,
where cotton has been grown for more than 6,000 years, since the preHarappan period. Cotton from the Harappan civilization was exported to
Mesopotamia during the 3rd millennium BC, and cotton was soon known to
the Egyptians as well as becoming a prized trading item from Nubians and
Meroe. The famous Greek historian Herodotus also wrote about Indian cotton:
"There are trees which grow wild there, the fruit of which is a wool exceeding
in beauty and goodness that of sheep. The Indians make their clothes of this
tree wool." (Book III. 106).
According to the Columbia Encyclopedia, Sixth Edition
Cotton has been spun, woven, and dyed since prehistoric times. It
clothed the people of ancient India, Egypt, and China. Hundreds of years
before the Christian era cotton textiles were woven in India with matchless
skill, and their use spread to the Mediterranean countries. In the 1st cent. Arab
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traders brought fine muslin and calico to Italy and Spain. The Moors
introduced the cultivation of cotton into Spain in the 9th cent. Fustians and
dimities were woven there and in the 14th cent. In Venice and Milan, at first
with a linen warp. Little cotton cloth was imported to England before the 15th
cent., although small amounts were obtained chiefly for candlewicks.
By the 17th cent. The East India Company was bringing rare fabrics
from India. Native Americans skillfully spun and wove cotton into fine
garments and dyed tapestries. Cotton fabrics found in Peruvian tombs are said
to belong to a pre-Inca culture.
In color and texture the ancient Peruvian and Mexican textiles resemble
those found in Egyptian tombs.
During the late medieval period, cotton became known as an imported
fiber in northern Europe, without any knowledge of how it was derived, other
than that it was a plant, noting its similarities to wool, people in the region
could only imagine that cotton must be produced by plant-borne sheep. John
Mandeville, writing in 1350, stated as fact the now-preposterous belief: "There
grew there [India] a wonderful tree which bore tiny lambs on the ends of its
branches. These branches were so pliable that they bent down to allow the
lambs to feed when they are hungrie." (See Vegetable Lamb of Tartary.) This
aspect is retained in the name for cotton in many European languages, such as
German Baumwolle, which translates as "tree wool" (Baum means "tree";
Wolle means "wool"). By the end of the 16th century, cotton was cultivated
throughout the warmer regions in Asia and the Americas.

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THE VEGETABLE LAMB OF TARTARY:

India's cotton-processing sector gradually declined during British
expansion in India and the establishment of colonial rule during the late 18th
and early 19th centuries. This was largely due to the East India Company's deindustrialization of India, which forced the closing of cotton processing and
manufacturing workshops in India, to ensure that Indian markets supplied only
raw materials and were obliged to purchase manufactured textiles from Britain.
The advent of the Industrial Revolution in Britain provided a great boost
to cotton manufacture, as textiles emerged as Britain's leading export. In 1738
Lewis Paul and John Wyatt, of Birmingham England, patented the Roller
Spinning machine, and the flyer-and-bobbin system for drawing cotton to a
more even thickness using two sets of rollers that traveled at different speeds.
Later, the invention of the spinning jenny in 1764 and Richard
Arkwright's spinning frame (based on the Roller Spinning Machine) in 1769
enabled British weavers to produce cotton yarn and cloth at much higher rates.
From the late eighteenth century onwards, the British city of Manchester
acquired the nickname "cotton polis" due to the cotton industry's omnipresence
within the city, and Manchester's role as the heart of the global cotton trade.
Production capacity was further improved by the invention of the cotton gin by
Eli Whitney in 1793. Improving technology and increasing control of world
markets allowed British traders to develop a commercial chain in which raw
cotton fibers were (at first) purchased from colonial plantations, processed into
cotton cloth in the mills of Lancashire, and then re-exported on British ships to
captive colonial markets in West Africa, India, and China (via Shanghai and
Hong Kong).

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By the 1840s, India was no longer capable of supplying the vast

quantities of cotton fibers needed by mechanized British factories, while
shipping bulky, low-price cotton from India to Britain was time-consuming and
expensive. This, coupled with the emergence of American cotton as a superior
type (due to the longer, stronger fibers of the two domesticated native
American species, Gossypium hirsutum and Gossypium barbadense),
encouraged British traders to purchase cotton from plantations in the
United States and the Caribbean. This was also much cheaper as it was
produced by unpaid slaves. By the mid 19th century, "King Cotton" had
become the backbone of the southern American economy. In the United States,
cultivating and harvesting cotton became the leading occupation of slaves.s
During the American Civil War, American cotton exports slumped due to
a Union blockade on Southern ports, also because of a strategic decision by the
Confederate Government to cut exports, hoping to force Britain to recognize
the Confederacy or enter the war, prompting the main purchasers of cotton,
Britain and France, to turn to Egyptian cotton.
British and French traders invested heavily in cotton plantations and the
Egyptian government of Viceroy Isma'il took out substantial loans from
European bankers and stock exchanges. After the American Civil War ended in
1865, British and French traders abandoned Egyptian cotton and returned to
cheap American exports, sending Egypt into a deficit spiral that led to the
country declaring bankruptcy in 1876, a key factor behind Egypt's annexation
by the British Empire in 1882.

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During this time cotton cultivation in the British Empire, especially India
greatly increased to replace the lost production of the American South.
Through tariffs and other restrictions the British government discouraged the
production of cotton cloth in India; rather the raw fiber was sent to England for
processing. The Indian patriot Gandhi described the process:
1. English people buy Indian cotton in the field, picked by Indian labor at
seven cents a day, through an optional monopoly.
2. This cotton is shipped on British bottoms, a three weeks journey across the
Indian Ocean, down the Red Sea, across the Mediterranean, through
Gibraltar, across the Bay of Biscay and the Atlantic Ocean to London. One
hundred per cent profit on this freight is regarded as small.
3.

The cotton is turned into cloth in Lancashire. You pay shilling wages
instead of Indian pennies to your workers. The English worker not only has
the advantage of better wages, but the steel companies of England get the
profit of building the factories and machines. Wages; profits; all these are
spent in England.

4. The finished product is sent back to India at European shipping rates, once
again on British ships. The captains, officers, sailors of these ships, whose
wages must be paid, are English. The only Indians who profit are a few
lascars who do the dirty work on the boats for a few cents a day.
5. The cloth is finally sold back to the kings and landlords of India who got
the money to buy this expensive cloth out of the poor peasants of India who
worked at seven cents a day. (Fisher 1932 pp 154-156)

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Prisoners farming cotton under trusty system - 1911

In the United States, Southern cotton provided capital for the continuing
development of the North. The cotton produced by enslaved African
Americans, not only helped the South, but also enriched northern merchants.
Much of the southern cotton was transshipped through the northern ports.
Profits from the cotton shipping provided some of the funds for the Francis
Cabot Lowell's Lowell Mills. In another example, a merchant named Anson
Phelps invested his profits from cotton shipping into iron mines in
Pennsylvania and metal works in Connecticut. Much of the development of
northern industry was made possible by the cotton provided by the enslaved
African Americans of the South. It also fostered the market revolution.
Cotton remained a key crop in the southern economy after emancipation
and the end of the civil war in 1865. Across the South, sharecropping evolved,
in which free black farmers worked on white-owned cotton plantations in
return for a share of the profits. Cotton plantations required vast labor forces to
hand-pick cotton fibers, and it was not until the 1950s that reliable harvesting
machinery was introduced into the South (prior to this, cotton-harvesting
machinery had been too clumsy to pick cotton without shredding the fibers).
During the early twentieth century.
Employment in the cotton industry fell as machines began to replace
laborers, and as the South's rural labor force dwindled during the First and
Second World Wars. Today, cotton remains a major export of the southern
United States, and a majority of the world's annual cotton crop is of the longstaple American variety.

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PESTS AND WEED:

The cotton industry relies heavily on chemicals such as fertilizers and
insecticides, although a very small number of farmers are moving toward an
organic model of production and organic cotton products are now available for
purchase at limited locations. These are popular for baby clothes and diapers.
Under most definitions, organic products do not use genetic engineering.

Hoeing a cotton field to remove weeds, Greene County, Georgia, USA,

1941Historically, in North America, one of the most economically destructive
pests in cotton production has been the boll weevil. Due to the US Department
of Agriculture's highly successful Boll Weevil Eradication Program (BWEP),
this pest has been eliminated from cotton in most of the United States. This
program, along with the introduction of genetically engineered "Bt cotton"
(which contains a bacteria gene that codes for a plant-produced protein that is
toxic to a number of pests such as tobacco budworm, cotton bollworm, and
pink bollworm), has allowed a reduction in the use of synthetic insecticides.
Mechanized harvesting:
Offloading freshly harvested cotton into a module builder in Texas;
previously built modules can be seen in the background of cotton in the United
States, Europe, and Australia is harvested mechanically, either by a cotton
picker, a machine that removes the cotton from the boll without damaging the
cotton plant, or by a cotton stripper, which strips the entire boll off the plant.
Cotton strippers are used in regions where it is too windy to grow picker
varieties of cotton, and usually after application of a chemical defoliant or the
natural defoliation that occurs after a freeze.
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Cotton is a perennial crop in the tropics and without defoliation or

freezing, the plant will continue to grow. Cotton continues to be picked by
hand in poor countries such as Uzbekistan.
COMPETITION FROM SYNTHETIC FIBERS:
The era of manufactured fibers began with the development of rayon in
France in the 1890s. Rayon is derived from a natural cellulose and cannot be
considered synthetic, but is requires extensive processing in a manufacturing
process and led the less expensive replacement of more naturally derived
materials. A succession of new synthetic fibers was introduced by the
chemicals industry in the following decades. Acetate in fiber form was
developed in 1924. Nylon the first fiber synthesized entirely from
petrochemicals was introduced as a sewing thread by DuPont in 1936, followed
by DuPonts acrylic in 1944. Some garments were created from fabrics based
on these fibers, such as women's hosiery from nylon, but it was not until the
introduction of polyester into the fiber marketplace in the early 1950s that the
market for cotton came under threat. The rapid uptake of polyester garments in
the 1960s caused economic hardship in cotton exporting economies, especially
in Central American countries such as Nicaragua where cotton production had
boomed tenfold between 1950 and 1965 with the advent of cheap chemical
pesticides. Cotton production recovered in the 1970s, but crashed to pre-1960
levels in the early 1990s.
Beginning as a self-help program in the mid-1960s, the Cotton Research
& Promotion Program was organized by U.S. cotton producers in response to
cotton's steady decline in market share. At that time, producers voted to set up
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a per-bale assessment system to fund the program, with built-in safeguards to

protect their investments.
With the passage of the Cotton Research & Promotion Act of 1966, the
program joined forces and began battling synthetic competitors and reestablishing markets for cotton. Today, the success of this program has made
cotton the best-selling fiber in the U.S. and one of the best-selling fibers in the
world.
Administered by the Cotton Board and conducted by Cotton
Incorporated, the Cotton Research & Promotion Program works to greatly
increase the demand for and profitability of cotton through various research
and promotion activities. It is funded by U.S. cotton producers and importers.
USES OF COTTON:
Cotton is used to make a number of textile products. These include
terrycloth, used to make highly absorbent bath towels and robes; denim, used
to make blue jeans; chambray, popularly used in the manufacture of blue work
shirts (from which we get the term "blue-collar"); and corduroy, seersucker,
and cotton twill. Socks, underwear, and most T-shirts are made from cotton.
Bed sheets often are made from cotton. Cotton also is used to make yarn used
in crochet and knitting. Fabric also can be made from recycled or recovered
cotton that otherwise would be thrown away during the spinning, weaving, or
cutting process. While many fabrics are made completely of cotton, some
materials blend cotton with other fibers, including rayon and synthetic fibers
such as polyester.

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In addition to the spinning industry, cotton is used in fishnets, coffee

filters, tents, gunpowder (see Nitrocellulose), cotton paper, and in bookbinding.
The first Chinese paper was made of cotton fiber. Fire hoses were once made
of cotton.
The cottonseed which remains after the cotton is ginned is used to
produce cottonseed oil, which, after refining, can be consumed by humans like
any other vegetable oil. The cottonseed meal that is left generally is fed to
livestock. During slavery, cotton root bark was used as an abortifacient, that is,
a folk remedy to provoke abortion.
Cotton linters are fine, silky fibers which adhere to the seeds of the
cotton plant after ginning. These curly fibers typically are less than 1/8 in,
3mm, long.
The term also may apply to the longer textile fiber staple lint as well as
the shorter fuzzy fibers from some upland species. Linters are traditionally
used in the manufacture of paper and as a raw material in the manufacture of
cellulose.
Shiny cotton is a processed version of the fiber that can be made into
cloth resembling satin for shirts and suits. However, its hydrophobic property
of not easily taking up water makes it unfit for the purpose of bath and dish
towels (although examples of these made from shiny cotton are seen).
The term Egyptian cotton refers to the extra long staple cotton grown in
Egypt and favored for the luxury and up market brands worldwide. During the
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U.S. Civil War, with heavy European investments, Egyptian-grown cotton

became a major alternate source for British spinning mills. Egyptian cotton is
more durable and softer than American Pima cotton, which is why it is more
expensive. Pima cotton is American cotton that is grown in the south western
states of the U.S .In South Asia, cotton is widely used in mattresses, which are
the most common type of mattress used in that region.
THE INTERNATIONAL COTTON TRADE:
Cottonseed output in 2007
The United States, with sales of $4.9 billion, and Africa, with sales of
$2.1 billion, is the largest exporters of raw cotton. Total international trade is
$12 billion. Africa's share of the cotton trade has doubled since 1980. Neither
area has a significant domestic textile industry, textile manufacturing having
moved to developing nations in Eastern and South Asia such as India and
China. In Africa cotton is grown by numerous small holders. Donavan
Enterprises, based in Memphis, Tennessee, is the leading cotton broker in
Africa with hundreds of purchasing agents.
It operates cotton gins in Uganda, Mozambique, and Zambia. In Zambia
it often offers loans for seed and expenses to the 180,000 small farmers who
grow cotton for it, as well as advice on farming methods. Cargill also
purchases cotton in Africa for export.
The 25,000 cotton growers in the United States are heavily subsidized at
the rate of $2 billion per year. The future of these subsidies is uncertain and has
led to anticipatory expansion of cotton brokers' operations in Africa. Donavan
expanded in Africa by buying out local operations. This is only possible in
former British colonies and Mozambique; former French colonies continue to

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maintain tight monopolies, inherited from their former colonialist masters, on

cotton purchases at low fixed prices.
Fair trade:
Cotton is an enormously important commodity throughout the world.
However, many farmers in developing countries receive a low price for their
produce, or find it difficult to compete with developed countries.
This has led to an international dispute:
On 27 September 2002 Brazil requested consultations with the US
regarding prohibited and actionable subsidies provided to US producers, users
and/or exporters of upland cotton, as well as legislation, regulations, statutory
instruments and amendments thereto providing such subsidies (including
export credits), grants, and any other assistance to the US producers, users and
exporters of upland cotton.
On 8 September 2004, the Panel Report recommended that the United
States "withdraw" export credit guarantees and payments to domestic user and
exporters, and "take appropriate steps to remove the adverse effects or
withdraw" the mandatory price-contingent subsidy measures.
In addition to concerns over subsidies, the cotton industries of some
countries are criticized for employing child labor and damaging workers' health
by exposure to pesticides used in production. For example, cotton production
in Uzbekistan has been described as one of the most exploitative industries in
the world. The international production and trade situation has led to 'fair trade'
cotton clothing and footwear, joining a rapidly growing market for organic
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clothing, fair fashion or so-called 'ethical fashion'. The fair trade system was
initiated in 2005 with producers from Cameroon, Mali and Senegal.
Organic cotton:
Organic cotton is cotton that is grown without insecticide or pesticide.
Worldwide, cotton is a pesticide-intensive crop, using approximately 25% of
the world's insecticides and 10% of the world's pesticides. According to the
World Health Organization (WHO), 20,000 deaths occur each year from
pesticide poisoning in developing countries, many of these from cotton
farming. Organic agriculture uses methods that are ecological, economical, and
socially sustainable and denies the use of agrochemicals and artificial
fertilizers. Instead, organic agriculture uses corporation, the growing of
different crops than cotton in alternative years. The use of insecticides is
prohibited; organic agriculture uses natural enemies to suppress harmful
insects. The production of organic cotton is more expensive than the
production of conventional cotton. Although toxic pollution from synthetic
chemicals is eliminated, other pollution-like problems may remain, particularly
run-off. Organic cotton is produced in organic agricultural systems that
produce food and fiber according to clearly established standards. Organic
agriculture prohibits the use of toxic and persistent chemical pesticides and
fertilizers, as well as genetically modified organisms. It seeks to build
biologically diverse agricultural systems, replenish and maintain soil fertility,
and promote a healthy environment.

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COMPANY PROFILE
INTRODUCTION:
SREE LALITHA PARAMESWARI SPINNING MILLS Pvt Ltd., is one of the
leading mills in India, producing high quality medium and fine count cotton yarn
for sensitive consumers different countries.
Operation of the mills began in the year 2006, being promoted by its illustrious
founder Shri.T.V.Seshagiri Rao, Since then the mills have shown remarkable
growth not only in the area of sales & volume, but more importantly, in its stature.
It is interesting to note that the mills command a premium price in the markets
where it is present, a recognition accorded to it by its customers in appreciation
towards its commitment to quality, price and consistency of supply.
It is a firm belief, bequeathed by the founder, that even in adverse market
conditions, that supply be maintained to the extent required. It is an endearing
quality well appreciated by our customers, who have been the mainstay in the
remarkable progress of the company.
SREE LALITHA PARAMESWARI Spinning Mills, reputed and modern spinning
mill, incorporated in year Sri T.V.Seshagiri Rao, Chairman and Sri.
D.Suryaprakasa Rao, Managing Director has 28560 spindles situated near
Chebrolu Donks (towards Tenali) Narakoduru, Chebrolu, Guntur District, Andhra
Pradesh, India.
To provide cost effective, Consistent quality products by continual improvement
in work methods & customer focus.
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BOARD OF DIRECTORS
Quality and timely delivery remains the veritable password of the company.
Everything the company has achieved and continues to build today is derived from
its commitment to quality and its endeavour to bring all processes of production
integrated under its ambit.
Mr.D.SURYAPRAKASA RAO
(Managing Director)
SREE LALITHA PARAMESWARI

SPINNING MILLS is committed to

providing eco-friendly yarn products for home and industrial textile applications.
We constantly strive to add value to our customer's business by providing them
with superior quality products at competitive prices.We believe in maintaining high
ethical and professional standards by gluing to our core values of committment,
integrity, transparency, teamwork and creativity".
Mr.T AMBARISH
( Executive Director )
SREE LALITHA PARAMESWARI

SPINNING MILLS is committed to

providing eco-friendly yarn products for home and industrial textile applications.
We constantly strive to add value to our customer's business by providing them
with superior quality products at competitive prices.We believe in maintaining high
ethical and professional standards by gluing to our core values of committment,
integrity, transparency, teamwork and creativity".
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Mr.BASHKARA RAO
( Executive Director )
Sree Lalitha Parameswari Spinning Mills Pvt Ltd has set up State-of-Arts
facilities in the state of Andhra Pradesh with the unique concept of "Cotton to
Clothing" and is poised to emerge as one of the biggest players in the cotton
textiles & apparel arena. SREE LALITHA PARAMESWARI SPINNING
MILLS PVT LTD is one of the companies of Hyderabad based SREE
LALITHA PARAMESWARI SPINNING MILLS PVT LTD Group.
SREE LALITHA PARAMESWARI SPINNING MILLS PVT LTD Group
is an INR 1500 Crores conglomerate having interests in Seeds, Infrastructure,
Power, Sugar

and Textiles.

The

parent

company

SREE

LALITHA

PARAMESWARI SPINNING MILLS PVT LTD Limited is the largest seed

company in India. Its cotton seeds hybrid varieties - Bunny BT and Mallika BT
are household names in rural India. It is the first Indian seed company to achieve
a turnover of INR 500 Crores. Apart from the seed business, the group has
ambitious plans in power, infrastructure and Spinning businesses.
No textile company can claim to be as vertically integrated as we are.
Our value chain covers all the operations from the extraction of cotton lint to
garment manufacturing. Our facilities for ginning, spinning, weaving and
garmenting are equipped with latest technology machineries and manned by
experienced workforce.
Our parent company SREE LALITHA PARAMESWARI SPINNING
MILLS PVT LTD Limited is the biggest seed company in India. The cotton
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seeds sold under its brands are most sought after in India. The experience of the
parent company in cotton growing has given us the unique advantage in terms of
better selection of right quality of cotton kappa.
VISION AND MISSION:
VISION:
SREE LALITHA PARAMESWARI SPINNING MILLS PVT LTD
Spinning mills & Apparel aspires to become one of the leading innovative, ecofriendly and entrepreneurial companies in the 'Natural Fiber to Affordable
Fashion' domain
MISSION:
Fabrics and Garments To be the preferred and large share supplier of
shirting fabrics, bottom weight fabrics and garments sourced in and from India
or other strategic locations for discerning customers worldwide. To be among
the top three garments producer in India and to market at least 50% of our fabric
capacity as garment packages.
Brands To be the largest VFM (Value for Money) destination Store
brand for shirts in India in three years from its launch
Yarn To be among the largest premium fine count cotton spinners in the
world in the next five years.

GINNING:

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Our business starts right from kappas the raw material for producing
cotton. Our highly experienced Kappas procurement team personally visits the
fields to check the quality of supply. The stringent quality criteria followed
before the procurement allows us to pick the best quality kappas for ginning. All
our ginning units are fitted with the automated systems with pre cleaners. We
have humidification plants in all our ginning units to maintain the optimum
levels of humidity. The result is high quality cotton lint, which is the most
important factor affecting the various stages of textile value chain.
Capacity:

SPINNING:
Spinning is the process of making yarn from unbundled fibres. It includes
the following operations.
Upon arrival at the spinning mill, cotton bales are sampled according to
lint quality and origin to ensure yarn homogeneity. They are then opened to
make the lint fluffy by passage though bale-openers. The following important
step in the spinning process is cleaning. Bale fibers are usually fed to air-jet
(vortex) cleaners to remove extraneous matter from cotton lint (which may
hamper further cotton processing and affect lint quality). At this stage loose
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fibres are not aligned and parallel in a single continuous strand. Carding is the
process of straightening or paralleling the fibres.
Carding separates fibers from each other, straightens fibers, aligns and
condenses them into a single continuous strand, and removes impurities. A sliver
of approximately one-meter width is then obtained.
Cotton that has already been carded may be combed. Combining is an
optional step in the ginning process. This process is only used to produce
superior quality yarn and long- or extra long-staple fibers.
WEAVING:
In our endeavor to weave the best fabrics we have deployed in our
manufacturing facilities the most advanced machinery in the industry.
Unparalleled Air Jet Technology in our Picanol and Dornier machines makes it
possible to lend a flawless finish to our products. Our products are the preferred
choices of end users like processing houses and leading garment manufacturers.
The entire manufacturing process and the plant layout have been engineered
to ensure safe, reliable and smooth material flow from raw material to the
dispatch of finished gray fabric. Supervision by highly qualified and richly
experienced technical experts and un-interrupted quality power supply ensure
consistency in quality and meeting the delivery schedules. Our manufacturing
units are equipped with 1 1/2 times the required capacity of utilities like, air,
steam and humidity controls to ensure maximum utilization of the looms.
We have a highly efficient real time process control system Loom Data
System which helps analyze the operational data and immediately take action
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based on this. We are also in the process of implementing comprehensive

operating systems based on TQM.
Capacity:

PROCESSING:
Located in the midst of picturesque paddy fields, our process house truly
exemplifies the coexistence of nature and progress. Our highly advanced ETP
system will ensure that there is zero effluent discharge from our manufacturing
facility. Apart from that, we will have energy saving devices in our machines
like heat recovery systems from hot water and air.

All of our machineries will be state of the art with fully automated
dye/chemical dispensing system. These mainly will be imported from Germany,
Switzerland and Italy. Apart from the standard processing machines, we will
have latest technology high end finishing machines for sue ding, calendaring and
airo wash.
Coupled to the latest technology will be our seasoned supervisory and
management team and experienced work force. Moreover, integration of the

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process with our spinning and weaving verticals will allow us to have better
control over the inputs leading to supply best quality products in reasonable .
GARMENTING:
Our fully vertically integrated value chain enables us to serve our
customers in the best manner on two major areas quality and lead time.
Because of our own significant processing capacity, we will be able to source
quality fabric without delay leading to on time supply with shorter lead times.
We will have state of the art machineries, material handling equipments
and inventory management systems with latest technology washing facilities.
Our washing facilities will be placed in our process house which has zero
discharge from the plant.
Our State of art design studio at Hyderabad will be equipped with
sophisticated textile CAD and Mac systems. Highly creative and skilled design
team from international design schools is already on board.
Capacity:

PRODUCTS:
State of the art machineries at each of our

manufacturing units ensure

that we deliver the best quality products at very competitive prices.

Yarn:

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Carded, Combed, Combed Compact, Eli and double yarn in the range 20s to
100s.
OE yarn and OE fancy yarn in the range 6s to 24s.
Gassed and Gas mercerized yarn in the range 60s to 80s*.
Fabric:
Produced in the range from 50 to 140 on table grey width
Basic plains/poplin, twills, classical oxfords or pin-point oxfords
Fancy structures like:
The royal oxfords Matts
Herringbones
Satins
Chinos
Gabardine
Tussore
Canvass
Bedford cord structured fabrics
Combination weaves and dobby design
PROCESSING:
Our processing plant at Chandole will be capable of producing
Yarn Dyed Fabric
Piece Dyed Fabric
Bleached Fabric
Printed Fabric

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EMPLOYEES WELFARE:
We have a good canteen at each of our manufacturing units which provides
nutritious food to our employees at subsidized prices. There is a managing
committee which manages frequent checks on quality and quantity of food.
There are cooperative stores provided and all needy items are provided at
cost basis. There is a fully fledged dispensary provided for and full time doctors
are provided.
Every employee contributes towards a benevolent fund which is given to the
needy employee in case of exigencies.
HEALTH AND SAFETY:
All our workers and staff know and strictly follow the necessary safety
requirements in different working conditions. We have special refresher training
programs for all the staff/ workers in the area of safety.
All the necessary safety equipments both at personal level and factory
level are provided and are renewed periodically.
Apart from having a qualified doctor and dispensary available round the
clock at all our factory premises, we also organize annual medical camps for our
staff and workers.
The staff and workers quarters provided at our units are one of the best in
terms of hygiene and other facilities
ENVIRONMENT:
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We are having a zero discharge policy at all of our manufacturing units. We

will be fully recycling the water we are using Over 90% of our total production
comes only from natural/ organic fibers. All our units are having water
harvesting systems.
We are striving to achieve the ISO 14001certification
At least one third of the factory area at all our units will be covered by greenery.
We
Comply with all the regulatory norms for environment protection and up
gradation
SOCIAL RESPONSIBILITIES OF SREE LALITHA PARAMESWARI SM
EDUCATION:

Mandava Foundation strives to provide various opportunities for learning to

those who have never been to school, or have dropped out of it; it also works to
improve the quality of education in schools.
Establishing/running elementary schools, secondary schools, high schools,
colleges industrial, technical, vocational and other art, craft and science
schools, institutions of learning.
Hostels for the benefit of the students.
Providing books to deserving school children.
Scholarships to merit students for pursuing higher education.
Propagation of adult education.
Establishing libraries, reading rooms for creating reading habit among rural
people

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HEALTH CARE:
Providing medical care to people in rural areas where no medical facilities exist.
The Foundation aims to serve the people in various ways:
To establish, maintain, run Hospitals,
Nursing homes, Clinics, Surgical Theaters, Health Centers construction
and maintaining
Hospital, nursing, clinical, surgical, theater Health centers.
Provide facilities for helping the sick people viz. first aid centers, ambulances,
diagnostic centers, counseling centers.
RURAL DEVELOPMENT:
Agriculture being the mainstay in rural areas, to help farmers in higher
productivity, the Foundation plans to:
Establish/ maintain agriculture research stations for carrying out research to find
solutions for various problems by solving which the agriculture

productivity

can increase and the farming community by and large can benefit.
Provide help in agricultural extension activities for spreading the knowledge
about the new techniques and research findings for benefiting the farming
sector. Help the farmers who are underemployed and also the land
less unemployed poor for improvement in their livelihoods.
By providing work in rural areas through vocational training. Aiding by
contribution to institutions/NGOs involved in such activities. Establish adult
education centers, libraries in rural areas to create awareness in them to about the
developments in the country as well as in the world. To establish or render help
any institution for alleviation of human suffering in rural areas.
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CHAPTER-IV
DATA ANALYSIS AND INTERPRETATION
Statements showing the change in working capital for 2013-2014
Particles
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Total CA, Loans & Advances
Current Liabilities
Provisions
Total CL & Provisions
Net Working capital

Mar '14
1,105.32
3,730.32
1,956.52
602.29
144.79
2,703.60
1,055.10
3,758.70
4,610.46
573.49
5,183.95
-1,425.25

64

Mar '13
259.37
1,669.55
821.70
215.83
83.73
1,121.26
374.92
1,496.18
1,992.60
161.01
2,153.61
-657.43

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Calculation of operating profit for the period (2013-2014)

Particulars

Amount
(Cr)
2014

Net profit
Add: depreciation

Gross cash generated

Amount
(Cr)
2013

1404.23

1093.24

765.73

388.08

2169.96

1481.32

Less: taxation for the year

----

Net cash generated

2169.96

1481.32

STATEMENT OF SOURCES AND APPLICATION OF CASH

FOR THE PERIOD (2013-14)
Sources

Rs

Secured loans vehicles

2,64,04,635

Unsecured loans

3,05,46,865

Applications
Increase in Gross Block

Secured loans paid

Cash from operation

2,17,13,768

Net increase in
Working Capital

7,86,65,268

Rs
5,04,88,853

8,80,360

2,72,96,055

7,86,65,268

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Interpretation
From the above table it is observed that the net working capital of the
company shows increasing trend. The current assets of the company have increased
from Rs.8,24,33,147 to Rs.9,00,07,437 in 2013-2014. The current liability of the
company showing decreasing trend from Rs.7,41,08,130 to 5,43, 86,365 in 20132014. The net capital company stood at Rs.83,25,017 in 2013-2014. And it is
increased to Rs.3,56,21,072. The increasing working capital is recorded as
Rs.2,72,96,055.

It is evident from the above table that the total cash flow during the period
from 200-2006. Amount Rs.7,86,65,267. In the total cash flow 27.65% was
received from cash from operation, 33.56% received from secured loans and
38.8% was received from unsecured loans.
Regarding the application of cash 1.2% used for repayment of secured loans
and 64.18% used for purchase of fixed assets and cash used for working capital
constitution 34.69% respectively.
Conclusion:
It is concluded that during the period 2013-14 33.57% secured loans,
38.83% unsecured loans, 27.60% cash for operation. Increasing gross block
64.02%, 34.70% net increasing working capital, 1.12% secured loans paid.

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Statements showing the change in working capital for 2012-2013

Particles
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Total CA, Loans & Advances
Current Liabilities
Provisions
Total CL & Provisions
Net Working capital

Mar '13
259.37
1,669.55
821.70
215.83
83.73
1,121.26
374.92
1,496.18
1,992.60
161.01
2,153.61
-657.43

67

Mar '12
677.28
1,034.80
691.97
186.18
104.49
982.64
395.71
1,378.35
1,860.59
121.80
1,982.39
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Calculation of operating profit

For the period (2012-13)
Particulars

Amount
(Cr)
2013

Net profit

1093.24

Amount
(Cr)
2012
977.02

Add: depreciation

388.08

323.00

Gross cash generated

1481.32

1300.02

Less: taxation for the year

----

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Net cash generated

1481.32

1300.02

STATEMENT OF SOURCES AND APPLICATION OF CASH

FOR THE PERIOD (2012-2013)

SOURCES
SECURED LOANS

AMOUNT

APPLICATIONS

4,72,908

AMOUNT

SALES UNSECURED-LOANS

16,34,480

SECURED LOAN VEHICLE 1,86,10,566

GROSS BLOCK

3,32,36,937

CASH FROM OPERATION 2,18,70,705

INCREASE IN WORKING
WORKING CAPITA

60,82,762

4,09,54,179
4,09,54,179

INTERPRETATION:
From the above table it is observed that the net working capital of the
company shows increased From Rs. 9,00,07,439 to Rs. 10,85,93,163 in 2012-13.
The Rs. 6,68,89,330 in 2012-13. The net working capital of the company stood
Rs. 3,56,21,073 in 2012-2013.And it is increased to Rs. 4,17,03,833. The
increasing Working capital is recorded as Rs. 60,82,761.

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It is evident from the above table the total cash flow during the period from
2012-13.Amount Rs 4,09,54,179. In the total cash flow 53.40% was received from
cash operation and 45.44% was received from unsecured loans (vehicles) and
1.15% was received from secured loans.
Regarding the application of cash 3.99% used for repayment of
unsecured loans and 81.16% used for purchase of fixed assets and cash used for
working capital constitution 14.85% respective.
CONCLUSION:
It is concluded that during the period 2012-123 more than 53.4% of the cash
came trading activities 1.16% used in secured loans, 45 the application of cash
around 81.16% of the cash utilized for investing in fixed assets. And 3.99% used
for repayment of unsecured loans.

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Statements showing the change in working capital for 2011-2012

Particles
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Total CA, Loans & Advances
Current Liabilities
Provisions
Total CL & Provisions
Net Working Capital

Mar '12
677.28
1,034.80
691.97
186.18
104.49
982.64
395.71
1,378.35
1,860.59
121.80
1,982.39
-604.04

Mar '11
2,283.15
170.90
609.76
216.61
100.69
927.06
390.43
1,317.49
1,708.96
125.55
1,834.51
-517.02

Calculation of operating profit

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For the period(2011-2012)

Particulars

Amount
(Cr)
2012

Net profit

Amount
(Cr)
2011

977 .02

Add: depreciation

323.00

Gross cash generated

1300.02

1007.61
237.23
1244.84

Less: taxation for the year

----

Net cash generated

1300.02

1244.84

STATEMENT OF SOURCES AND APPLICATION OF CASH FOR THE

PERIOD (2011-2012)
Sources
Increase in Secured loans

Cash from operation

Rs

Applications

1,10,42,798

Increase in Gross Block

Net increase in
Working capital

2,28,49,042

Secured loans paid

Rs
92,42,544
6,61,506
1,84,70,442
5,17,348

Sale unsecured loans

3,38,91,840

3,38,91,840

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Interpretation:
From the above table it is observed that the net working capital of the
company shows increased From Rs. 10,85,93,165 to Rs. 10,60,39,507 in 2011-12.
The Rs. 6,36,74,166 in 2011-12. The net working capital of the company stood
Rs. 4,17,03,835 in 2011-12. And it is increased to Rs. 4,23,65,340. The increasing
Working capital is recorded as Rs. 6,61,506.
It is evident from the above table the total cash flow during the period from
2011-12. Amount Rs 2,28,49,042. In the total cash flow 67.42% was received and
32.58% was received from secured loans.
Regarding the application of cash 54.49% used for repayment of secured
loans,16.28% used for repayment of unsecured loans and 27.27% used for
purchase of fixed assets and cash used for working capital constitution 1.95%
respective.
CONCLUSION:
It is concluded that during the period 2011-12 more than 67.42% of the cash
came trading activities .32.58% increase in secured loans in the application of cash
around 27.27% of the cash utilized for investing in fixed assets. 54.49% used for
repayment of secured loans and 16.28% used for repayment of unsecured
loans.1.95% net working capital.

Statements showing the change in working capital for 2010-2011

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Particles

Mar '11

Mar '10

2,283.15

696.95

Investments

170.90

483.45

Inventories

609.76

433.58

Sundry Debtors

216.61

183.50

Cash and Bank Balance

100.69

89.59

Total Current Assets

927.06

706.67

Loans and Advances

390.43

265.46

Total CA, Loans & Advances

1,317.49

972.13

Current Liabilities

1,708.96

1,308.93

125.55

18.47

Total CL & Provisions

1,834.51

1,327.40

Net Current Assets

-517.02

-355.27

Capital Work in Progress

Provisions

Calculation of operating profit

For the period(2010-2011)
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Particulars

Amount
(Cr)
2011

Amount
(Cr)
2010

Net profit

1007.61

782.28

Add: depreciation

237.23

226.25

Gross cash generated

1244.84

1008.53

Less: taxation for the year

----

Net cash generated

1244.84

1008.53

STATEMENT OF SOURCES AND APPLICATION OF CASH FOR

THE PERIOD OF 2010-2011
Sources

Rs

Increase in Secured loans

1,39,73,064

Secured loans(Vehicles)

1,16,12,921

Cash from operation

2,33,71,281

Applications

Rs

Increase in Gross Block 3,50,70,719

Net increase in
Working capital
1,36,43,361

Sale unsecured loans

4,89,57,266

2,43,186

4,89,57,266

Interpretation:
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From the above table it is observed that the net working capital of the
company shows increased From Rs.10, 60, 39,507 to Rs.12, 90, 00,864 in 2010-11.
The Rs.7,29,92,162 in 2010-11. The net working capital of the company stood
Rs.4,23,65,341 in 2010-11. And it is increased to Rs.5,60,08,702. The increasing
Working capital is recorded as Rs.1,36,43,361.
It is evident from the above table the total cash flow during the period from
2010-11. Amount Rs.2,33,71,281. In the total cash flow 47.74% was received and
28.54% was received from unsecured loans,23.72% was received from secured
loans(vehicles).
Regarding the application of cash 0.50% used for repayment of unsecured
loans and 71.64% used for purchase of fixed assets cash used for working capital
constitution 27.87% respective.

CONCLUSION:
It is concluded that during the period 2010-11 more than 47.74% of the cash
came trading activities 23.72% used in secured loan vehicles 28.54% increase in
secured loans application of cash around 71.64% of the cash utilized for investing
in fixed assets, and 0.50% used for repayment of unsecured loans. 27.87%
networking capital

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NET INCREASES IN WORKING CAPITAL

YEAR

INCREASE /

AMOUNT

2010-2011
2011-2012
2012-2013
2013-2014

DECREASE
INCREASE
INCREASE
INCREASE
INCREASE

517.02
604.04
657.43
1425.25

The above table observed that the working capital Increased. In year 201011 the
working capital has been increased. In the year 2011-12 the working capital is Rs.
Due to the decrease in current liabilities the net working capital is increased.

Changes in cash from operations

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YEAR
2010-2011
2011-2012
2012-2013
2013-2014

AMOUNT
100.69
104.49
83.73
114.79

The above table explains that continuous fluctuations in flow of cash from
operation.
In the year 2010-11 the cash from operation is increased .The cash from operation
in the years & it has increased. in the year 2011-12. The cash from operation in the
year 2013-14 is Rs. 114.71.

USES & APPLICATION OF CASH

APPLIC

2010-11

2011-12
78

2012-13

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ATION
Increase
5,04,88,853
in Gross
Block
Secured
loans paid
Unsecure
d loans

8,80,360
----

3,32,36,937

92,42,544

------

1,84,70,442

16,34,480

55,17,348

3,50,70,719

---2,43,186

The above table shows that Gross block has increased to Rs. 5,04,88,853 in
2010-11. & Rs. 3,32,36,937 in 2011-12. The secured loans paid Rs.8,80,360 in
201011 &Rs.1,84,70,442 in 2012-13. The unsecured loans paid Rs.16,34,481in
the year2011-12. Next year Rs.55,17,348.And the last year Rs.2,43,186

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2010
Income

Schedule

Gross sales (including excise duty)

Rs.
1341716993

79

ECE

MBA Programme
L

49259933

Other income

139097609

Expenditure

2781953005

Ram materials consumed

181903306

Payments and benefits of employees

M1

99557971

Manufacturing, selling administration and

892417716

Other expenses

598078982

Excise duty

1497310

Interest

28600214

Depreciation

72918704

Increase / decrease in stocks

Profit

(Loss)

before

135681510
reliefs

and

80503442

55178068

concessions and writeoffs

Add: reliefs and concessions

741142301

Refer Note No:20 (b) of schedule o)

2832301456

Earning per share

(refer note No 27 of schedule O
Basic

-1.42

Dilted

-1.42

Note: The schedules notes and statement on accounting policies from an integral part of the
profit and loss account

BALANCE SHEETS AS AT 31ST MARCH 2010

Schedules

Rs.

Rs.

I. Sources of Cash:
1. Share holders Cash:
80

ECE

MBA Programme
a. Capital
b. Reserves

A
B

566992680
1572555583
2139548263

2. Loan Cash:
a. Secured loans
b. Unsecured Loans

C
D

1857340134
489946869
4486835132

II. Application of Cash

1. Fixed Asses
Gross profit
Less: Depreciation
Net profit
Capital work in progress
2. Investments
3. Current assts, loans and advances sundry
debtors
Cash & bank balances
Other current assets
Loans & advances

3373507089
1606060818
176,74,46,271
60516710

F
G1

1500
141292290

G2
G3
H

178132470
48130040
86172470
454572470

Less: current liabilities & provisions

a. Liabilities
b. Provisions
Net current assets
4. Deferred tax assets (Net)
5. Profit & loss account

I
J

651941573
20561230
217953160

554882327
2321941484
4486835132

Note: The schedules, notes and statements on accounting policies from an integral part of the
balance sheet.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2010
PARTICULAR
Cash flow from operating activities profit (loss) as per profit
and loss account
add (less) adjustments for
Depreciation

81

RS.
80503442
18530324
72918704

ECE

MBA Programme
Extraordinary items (Reliefs & concessions)
Extraordinary items (deferred revenue expenditure)
Extraordinary items deferred tax asst (net)
Credit balances written back
Dividends received
Interest received
Assets written off
Less on sales of assets
Provision for gratuity
Provision for leave encashment
Interest
Provision for doubtful advances
Profit on sale of investments
Store written off
Operating profit before working capital changes
Adjustments for
Inventories
Trade & other receivables
Trade payables
Cash flow form investing activities
Purchase of fixed assets (net after transfer form capital work
in progress
Interest received
Sale of fixed assets
Sale of investments
Dividends received
Taxes paid
Deferred revenue expenditure
Net cash used in investing activities
c. cash flow from financing activities
Interest paid
Un secured loans
Repayment of secured loans
Net increase in cash and cash equivalents
Add: cash and cash equivalents as at 31-03-2002
Cash and cash equivalent as at 31-03-2003

55178068
15890678
12,000
3216554
3345291
21028
3870495
156567
140432984
756567
2150897
767416
156110
62595791
1143152
61385596
139064443
199306887
136711096
1058980
2127742
3479111
2227555
7272415
12000
905990
2389369
44432595
29683876
70488164
144604635
5495170
53625210

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2011
Income

Schedule

Gross sales (including excise duty)

Rs.
1255575

82

ECE

MBA Programme
256178
Other income

999397

EXPENDITURE
Ram materials consumed

185864

Payments and benefits of employees

M1

98768

Manufacturing, selling administration and

M2

815540

Other expenses

4.95

Excise duty

165471

Interest

16304

Depreciation

1282442

Increase / decrease in stocks

17782

Profit (Loss) before reliefs and concessions and

-2851.60

writeoffs

10.3

Add: reliefs and concessions

-2841.30

Refer Note No:20 (b) of schedule o)

-2841.30

Earning per share

-23219.42

(refer note No 27 of schedule O

26028.61

Basic

-4.96

Dilted

-4.96

Note: The schedules notes and statement on accounting policies from an integral part of the
profit and loss account

BALANCE SHEETS AS AT 31ST MARCH 2011

Schedules

Rs.

Rs.

I. Sources of Cash:
1. Share holders Cash:

83

ECE

MBA Programme
a. Capital
b. Reserves

A
B

566996
1477272

2. Loan Cash:
a. Secured loans
b. Unsecured Loans

C
D

1961652
463580

3361813
1704722
1657091
1714634
0.02
112962
148221

II. Application of Cash

1. Fixed Asses
Gross profit
Less: Depreciation
Net profit
Capital work in progress
2. Investments
3. Current assts, loans and advances sundry
debtors
Cash & bank balances
Other current assets
Loans & advances
Less: current liabilities & provisions
a. Liabilities
b. Provisions
Net current assets
4. Deferred tax assets (Net)
5. Profit & loss account

4469498

54587
1.1
81563
398443
I
J

778984
25552
506093

558093
4469497

Note: The schedules, notes and statements on accounting policies from an integral part of the
balance sheet.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2011
PARTICULAR
Cash flow from operating activities profit (loss) as per profit and
loss account
add (less) adjustments for

84

RS.
-2809.20
163.04

ECE

MBA Programme
Depreciation
Extraordinary items (Reliefs & concessions)
Extraordinary items (deferred revenue expenditure)
Extraordinary items deferred tax asst (net)
Credit balances written back
Dividends received
Interest received
Assets written off
Less on sales of assets
Provision for gratuity
Provision for leave encashment
Interest
Provision for doubtful advances
Profit on sale of investments
Store written off
Operating profit before working capital changes
Adjustments for
Inventories
Trade & other receivables
Trade payables
Cash flow form investing activities
Purchase of fixed assets (net after transfer form capital work in
progress
Interest received
Sale of fixed assets
Sale of investments
Dividends received
Taxes paid
Deferred revenue expenditure
Net cash used in investing activities
c. cash flow from financing activities
Interest paid
Un secured loans
Repayment of secured loans
Net increase in cash and cash equivalents
Add: cash and cash equivalents as at 31-03-2002
Cash and cash equivalent as at 31-03-2003

-10.3
-132.11
-69.87
-23.99

0.13
33.94
16.11
1654.71
-1083.59
283.3
346.53
132919
1959.02
-8.61
35.1
21.11
8.51
3.49
59.6
-793.35
-294.52
221.41
870.46
64.57
481.3
545.87

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2012
Income

Schedule

Gross sales (including excise duty)

Rs.

Rs.
15599.47

Rs.263022805 (Rs.290023286)

3046.76

85

ECE

MBA Programme
Other income

12552.71

EXPENDITURE

13526.69

Ram materials consumed

2203.57

Payments and benefits of employees

M1

1017.77

Manufacturing, selling administration

M2

10070.05

and
Other expenses

-5.42

Excise duty

1844.92

Interest

126.71

Depreciation

15257.60

Increase / decrease in stocks

Profit

(Loss)

before

reliefs

9.65
and

1740.56

concessions and writeoffs

1957.61

Add: reliefs and concessions

217.05

Refer Note No:20 (b) of schedule o)

1.93

Earning per share

26028.61

(refer note No 27 of schedule O

25787.28

Basic

0.43

Dilted

0.43

Note: The schedules notes and statement on accounting policies from an integral part of the
profit and loss account

BALANCE SHEETS AS AT 31ST MARCH 2012

Schedules

Rs.

Rs.

I. Sources of Cash:
1. Share holders Cash:
86

ECE

MBA Programme
a. Capital
b. Reserves

A
B

566993
1359168

1926161

2. Loan Cash:
a. Secured loans
b. Unsecured Loans

C
D

16079.06
6040.28
22119.34

14380.95

II. Application of Cash

1. Fixed Asses
Gross profit
Less: Depreciation
Net profit
Capital work in progress
2. Investments
3. Current assts, loans and advances sundry
debtors
Cash & bank balances
Other current assets
Loans & advances
Less: current liabilities & provisions
a. Liabilities
b. Provisions
Net current assets
4. Deferred tax assets (Net)
5. Profit & loss account

I
J
K

33480.69
18077.65
15403.04
559.07
0.02
1042.05
1537.42
391.28
21.32
1223.55
398443
9944.67
246.55
-59.756
5975.60
5607.14

15962.11

1215.62

41380.95

Note: The schedules, notes and statements on accounting policies from an integral part of the
balance sheet.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2012
PARTICULAR
Cash flow from operating activities profit (loss) as per profit and
loss account
add (less) adjustments for
Depreciation

87

RS.
126.71
1957.61

ECE

MBA Programme
Extraordinary items (Reliefs & concessions)
Extraordinary items (deferred revenue expenditure)
Extraordinary items deferred tax asst (net)
Credit balances written back
Dividends received
Interest received
Assets written off
Less on sales of assets
Provision for gratuity
Provision for leave encashment
Interest
Provision for doubtful advances
Profit on sale of investments
Store written off
Operating profit before working capital changes
Adjustments for
Inventories
Trade & other receivables
Trade payables
Cash flow form investing activities
Purchase of fixed assets (net after transfer form capital work in
progress
Interest received
Sale of fixed assets
Sale of investments
Dividends received
Taxes paid
Deferred revenue expenditure
Net cash used in investing activities
c. cash flow from financing activities
Interest paid
Un secured loans
Repayment of secured loans
Net increase in cash and cash equivalents
Add: cash and cash equivalents as at 31-03-2002
Cash and cash equivalent as at 31-03-2003

1.93
26.21
28.98
0.44
19.05
10.08
1844.92
19.99
768.49
-596.62

87.58
499.49
2093.51
1681.60
1084.98
138.59
16.36
18.77
14.63
780.72

1133.2
1330.51
2012.29
2020.29
154.59
545.87
391.28

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2013
Income
Gross sales (including excise duty)
Rs.263022805 (Rs.290023286)
Other income

Schedule
L

88

Rs.

Rs.
12282.69
2143.2
10139.49
3733.73

ECE

MBA Programme

EXPENDITURE
Ram materials consumed
Payments and benefits of employees
Manufacturing, selling administration
and
Other expenses
Excise duty
Interest
Depreciation
Increase / decrease in stocks
Profit (Loss) before reliefs

M1
M2

10194.83

13873.22
1469.92
2737.52
165.51
16331.68
93.88
16237.8
2364.58
6501.01
4136.43
0

and

concessions and writeoffs

Add: reliefs and concessions
Refer Note No:20 (b) of schedule o)
Earning per share
(refer note No 27 of schedule O
Basic
Dilted

91.97
4017.02
-25787.28
21770.26
3.43
--

Note: The schedules notes and statement on accounting policies from an integral part of the
profit and loss account

BALANCE SHEETS AS AT 31ST MARCH 2013

Schedules
I. Sources of Cash:
1. Share holders Cash:
a. Capital
b. Reserves
2. Loan Cash:
a. Secured loans
b. Unsecured Loans
II. Application of Cash
1. Fixed Asses
Gross profit
Less: Depreciation
Net profit
Capital work in progress

Rs.

Rs.

A
B

11711.73
12607.63

24319.36

C
D

6601.83
5581.34

32484.59

F
89

12183.17
36502.53
19592.12
12892.47
39.25
12931.72
ECE

MBA Programme
2. Investments
3. Current assts, loans and advances sundry
debtors
Cash & bank balances
Other current assets
Loans & advances
Less: current liabilities & provisions
a. Liabilities
b. Provisions
Net current assets
4. Deferred tax assets (Net)
5. Profit & loss account

1293.06
1293.06

0.02

1070.44
736.74
26.42
1904.46

1070.44

I
J

8472.77
273

5515.81
21770.26

5031.12

3712.65
36502.53

Note: The schedules, notes and statements on accounting policies from an integral part of the
balance sheet.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2013
PARTICULAR
Cash flow from operating activities profit (loss) as per profit
and loss account
add (less) adjustments for
Depreciation
Extraordinary items (Reliefs & concessions)
Extraordinary items (deferred revenue expenditure)
Extraordinary items deferred tax asst (net)
Credit balances written back
Dividends received
Interest received
Assets written off
Less on sales of assets
Provision for gratuity
Provision for leave encashment
Interest

90

RS.
4017.02

165.51
-6501.01
27.44
91.97
-37.19
78.22
523.22

7.95
2737.52

ECE

MBA Programme
Provision for doubtful advances
Profit on sale of investments
Store written off
Operating profit before working capital changes
Adjustments for
Inventories
Trade & other receivables
Trade payables
Cash flow form investing activities
Purchase of fixed assets (net after transfer form capital work
in progress
Interest received
Sale of fixed assets
Sale of investments
Dividends received
Taxes paid
Deferred revenue expenditure
Net cash used in investing activities
c. cash flow from financing activities
Interest paid
Un secured loans
Share premium received
Repayment of secured loans
Net cash fro financing ativities
Net increase in cash and cash equivalents
Add: cash and cash equivalents as at 31-03-2002
Cash and cash equivalent as at 31-03-2003

91

3492.19
11.62
-2215.43
-263.18
-539.26
1505.67
703.23
-13.73
15.99
7312
4.92
-12.51
35.81

241.33
899.82
2647.25
1352.74
-650.70
1821.85
345.46
391.28
736.74

ECE

MBA Programme
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2014
Income

Schedule

INCOME
Gross sales (including excise duty)
Rs.263022805 (Rs.290023286)
Other income
EXPENDITURE
Ram materials consumed
Payments and benefits of employees
Manufacturing, selling administration
and
Other expenses
Excise duty
Interest
Depreciation
Increase / decrease in stocks
Profit (Loss) before reliefs

Rs.

L
M1
M2

Rs.
51538.99
7285.09
44253.9
880.78
45134.68
6857.43
2479.33
26909.33
18.14
1609.45
129.18
38003.38
-70.6
7201.90

and

concessions and writeoffs

Add: reliefs and concessions
Refer Note No:20 (b) of schedule o)
Earning per share
(refer note No 27 of schedule O
Basic
Dilted

20.22
39.61
21770.26
14374.65
6.14
5.66

Note: The schedules notes and statement on accounting policies from an integral part of the
profit and loss account

BALANCE SHEETS AS AT 31ST MARCH 2014

Schedules

Rs.

Rs.

24502.34

I. Sources of Cash:
1. Share holders Cash:
a. Capital
b. Reserves

A
B

11711.73
12607.63

2. Loan Cash:
a. Secured loans

6601.83

92

ECE

MBA Programme
b. Unsecured Loans

II. Application of Cash

1. Fixed Asses
Gross profit
Less: Depreciation
Net profit
Capital work in progress
2. Investments
3. Current assts, loans and advances sundry
debtors
Cash & bank balances
Other current assets
Loans & advances
Less: current liabilities & provisions
a. Liabilities
b. Provisions
Net current assets
4. Deferred tax assets (Net)
5. Profit & loss account

5353.43

I
J
K

12183.17
36503
32484.59
19592.12
12892.47
39.25
12931.72
0.02
1293.06
1070.44
736.74
26.42
1931.72
5031.12
8472.77
8472.77
3714.65
21770.26
36502.53

Note: The schedules, notes and statements on accounting policies from an integral part of the
balance sheet.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2014

93

ECE

MBA Programme

PARTICULAR
Cash flow from operating activities profit (loss) as per
profit and loss account
add (less) adjustments for
Depreciation
Extraordinary items (Reliefs & concessions)
Extraordinary items (deferred revenue expenditure)
Extraordinary items deferred tax asst (net)
Credit balances written back
Dividends received
Interest received
Assets written off
Less on sales of assets
Provision for gratuity
Provision for leave encashment
Interest
Provision for doubtful advances
Profit on sale of investments
Store written off
Operating profit before working capital changes
Adjustments for
Inventories
Trade & other receivables
Trade payables
Cash flow form investing activities
Purchase of fixed assets (net after transfer form capital
work in progress
Interest received
Sale of fixed assets
Sale of investments
Dividends received
Taxes paid
Deferred revenue expenditure
Net cash used in investing activities
c. cash flow from financing activities
Interest paid
Un secured loans
Share premium received
Repayment of secured loans
Net cash fro financing ativities
Net increase in cash and cash equivalents
94
Add: cash and cash equivalents as at 31-03-2002
Cash and cash equivalent as at 31-03-2003

RS.

7395.61
129.18
213.09
39.6
222.54
-98.8
2.69
1.94
1609.45
233.89
197.48
8192.45
4729.92
4729.92
14214.84
473.29
19418.04
11225.59
96.22
11321.81
326.68
3447.22
96.66
279.29
3397.95
2030.30
330.7
874
1625.64
15143.52
15943.56
1223.80
736.73
ECE
1960.53

MBA Programme

FINDINGS
During the period 2008-2009 more than 28% of the cash came from trading
activities. In the application of cash around 91% utilized for investing in fixed
assets.
During the period 2008-2009 to 2009-2010 more than 27% of the cash came
from trading activities. The application of cash around 64% of the cash was
utilized for investing in fixed assets.
During the period 2008-2009 to 2009-10 more than 53.41% of the cash came
from trading activities. In the application of the cash around 81.17% of the
cash are utilized for investing in fixed assets.
During the period 2009-2010 to 2011-2012 more than 67.42% of the cash
came trading activities. In the application of the cash 27.27% of the cash are
utilized for investing in fixed assets.
During the period 2010-2011 to 2011-2012 more than 47.74% of the cash
came trading activities. In the application of the cash 71.64% of the cash are
utilized for investing in fixed assets.
During the period 2010-11 to 2011-12 more than 54.25% of the cash came
trading activities. In the application of the cash 71.64% of the cash are utilize
for the investing in fixed assets.

95

ECE

MBA Programme

SUGGESTIONS
For the improving the financial performance of the company the
following suggestions are made.
In order to reduce the outside borrowings in the company has to acquire.
The capital from equity sources. Keeping in view the debt equity the
proportion as normal.
The liquidity of the company should be improved by maintaining the
optimum current assets and liquid assets according to standard norms.
The quantum of the sales generated should be improved impressively in
order to attain higher return on investment. To improve the financial
health of the company and maximizing the time between the source
mobilization and utilization the management must introduce the new cost
saving techniques.

96

ECE

MBA Programme

BIBLIOGRAPHY
1. FINANCIAL MANAGEMENT

KHAN AND JAIN (TMH Publications)

2. MANAGEMENT ACCOUNTTG
R.K.

SHARMA

SHASHI

K.GUPTA

(KALYANI Publications)
3. THEORY OF FINANCIAL MANEGEMENT I.M.PANDEY
(VIKAS Publications)
4. FINANCIAL MANEGEMENT

D.ChandraBose

97

ECE