A

PROJECT REPORT
ON
CASH FLOW FUND FLOW
ANALYSIS
SUBMITTED TO
UNIVERSITY OF PUNE
IN PARTIAL OF FULLFILLMENT OF 2 YEARS FULL TIME COURSE
MASTERS OF BUSINESS ADMINSTRATION (MBA)

SUBMITTED BY,
MR. Bhupendra s. Purohit
(BATCH 2012-14)

UNDER THE GUIDENCE OF

Prof. PRAJKTA JOSHI
S.K.N. SINHGAD SCHOOL OF BUSINESS MANAGEMENT,
AMBEGAON, PUNE-411041

DECLARATION

I, the undersigned, hereby declare that the project report entitled Cash

flow fund flow analysis written and submitted by me to the

University of Pune, in partial fulfilment of the requirement for the award of
degree of master of business administration under the guidance Prof.

Prajakta Joshi

ACKNOWLEDGEMENT

I am sincerely grateful to those people who made their way out in helping
me to accomplish my project. At beginning I was very sceptical about how
to lead my project through was helped unanimously by many persons
throughout my project days. At first, my sincere thanks to Mrs. Prajkta Joshi,
SKNSSBM, PUNE.
I take this opportunity as privilege to articulate my deep sense of
gratefulness to the

My sincere gratitude to Mr. Sunil Yenegure, head of account payable,

Kpitcummins info. ltd for his training that helped me in learning much about
the Finance Methodology. Also I am grateful to Mr. Kiran Chitnis and Kirtipal
Kamble for his overall support throughout my training program. Lastly I
would like to thank my institution management for their effort in providing
us this opportunity to get a first-hand experience of corporate world. I am
also grateful to Mr. Prashant late and Mandar Kulkarni who gave me
reference to get a chance to work in Kpitcummins infosystem ltd.

Place: Pune
Date:
Purohit.

Bhupendra

Executive summary
I, Bhupendra S. Purohit, student of batch 2012-2014 at SKN SINHGAD
SCHOOL OF BUSINESS MANAGEMENT, PUNE, Pursued my summer internship
program with Kpitcummins infosystem pvt.ltd.
,Pune(www.kpitcummins.com), from 20th May to 1st Aug 2013.
KPITCUMMINS located at Hinjwadi, Pune. It is one of the leading company
in global IT consulting and product engineering partner focused on

co-innovating domain intensive technology solutions for

corporations specializing in automotive & transportation,
manufacturing and energy & utilities.
I was assigned the project of analysing the financial performance
Kpitcummins using cash flow and fund flow statements during
2010-2013.
This project helps me in understanding different financial
statements. There are various financial statements company such
as:
Balance sheet
Profit and Loss statements
Cash Flow statements

After analysing all statements I understand the exact financial position of

company. It helped in determining whether company is having shortage or
excess in cash.

CHAPTER - 1
INTRODUCTION

Introduction
Introduction to Study:
The ultimate objective of financial statements is to provide
maximum detailed information about the organisation to the
public. The financial statements like Profit & Loss A/C and Balance
Sheet fulfil this objective very well. The Profit & Loss A/C shows the
change in the owners equity as a result of productive and trade
activities during the period. The Balance Sheet, on the other hand,
portrays the financial position of the undertaking, the asset side
indicating the deployment of resources in various assets and the
liability side showing manner in which these resources were
obtained.
The information supplied by these statements
sometimes may not be adequate. In some cases the Profit & Loss
A/C of a firm may reveal that it has earned sufficient profits and
Balance Sheet may indicate sound solvency position but even then
the concern may not be able to distribute the profit in cash or
carry out its normal operations due to shortage of cash.
Under such circumstances, the owner or manager of the
concern, unless he is well-versed in accounting, will not be able to
understand the exact reasons for this cash shortage despite the

huge profit and sound financial strength. In such situation, tools of

financial analysis called Fund flow analysis & Cash flow analysis
reveals the exact movement of funds and cash and explain the
situation well.

Objective of the study: To analyse Funds flow and cash Flow statements to determine
shortage or excesses in cash.

To study the existing pattern of Funds flow and Cash flow

management in the organisation.

To reveal the importance of Funds flow and Cash flow to the

organization.

Understand the types of transactions that result in cash flows

from operating, investing & financing activities.

Scope of Study:The scope of study is concerned with-

1. Industrial overview

2. Current status of the company with special emphasis on IT

consulting and Product engineering company.

3. Study includes analysis of Financial Statements through Fund

flow and Cash flow statements.

4. Study is based on data collected through primary & secondary

modes of data collection.

5. Concerned study is undertaken in KPIT CUMMINS INFOSYSTEM

LTD. for the period of 70 Days.

CHAPTER - II
COMPANY PROFILE

We are a global IT consulting and product engineering partner focused on co-innovating

domain intensive technology solutions for corporations specializing in automotive &
transportation, manufacturing and energy & utilities.
A leader in technology solutions and services, we currently partner with 180+ global
corporations including Original Equipment Manufacturers (OEMs), and Tier 1 companies.
Our Information Technology solutions help customers run their businesses more
efficiently, while our Product Engineering solutions enable customers to build products
that are energy efficient, safer and yield more comfort for their end-customers.
Leveraging our technology and domain prowess, we partner with customers to co-create
transformational value that provides sustainable competitive advantage to their
businesses.
Our highly focused approach has helped us pioneer innovative solutions and file 43
patents in the automotive domain.
Our 8300+ strong team works at the forefront of technologies and processes to help
global corporations become efficient, integrated and innovative enterprises.
Corporate Facts
Headquarters: Pune, India
20+ years in business with global operations and partnerships
180+ longstanding customer relationships
Industries Served: Automotive, Energy & Utilities, Industrial Equipment, Hi-Tech,
Government & Defence
Technology Expertise: Product Engineering, Business and IT Consulting, Enterprise
Software Support
Employee Strength: 8300+
Global operations network in over 10 countries

Financial Facts:-

Ticker Symbol: BSE - 532400 | NSE - KPIT

Revenues FY 2012-13: USD 410.45 million
Net profit FY 2012-13: USD 36.49 million

Certifications:-

CMMI-DEV
ISO
9001:2008

v1.2Matuty
Level 5

ISO
27001

An
A Process
Information
Improvemen
A Quality
Security
t
Managemen
Management
t Standard
Standard Standard

BS25999:20 Automotive
7
SPICE Level5
A benchmark to
A Business Establish
Continuity
mature processes for
Managemen
t Standard automotive suppliers

Differentiate:Innovation - The world is evolving and so are business needs. We understand the
dynamic environment our customers face. We innovate so that they are able to globalize
and integrate effortlessly to build a smart and sustainable future.
Sustainability - We believe that recognition of our interdependence with our ecosystem is
the first step towards creating a sustainable world. We foresee an increased effort for the
entire Ecosystem coming together to create a common force to deliver excellence in all
our endeavours.
Focus on Industries - Our familiarity and deep focus in Automotive, Energy & Utilities,
Industrial Equipments and Semiconductor industries enables us to be specialized

providers for our customers. We provide relevant and proven solutions that are often
based on intellectual property (IP) created by us and thus, deliver predictable high
business value.
Quality Focus - Our customers are committed to providing the highest quality in every
aspect of their business operations. We understand the evolving priorities of our
customers and have processes that are built to deliver high productivity and right-firsttime deliveries that are on schedule, every time.
Our quality systems deliver measurable performance with efficient project management
and risk reduction, shortened development cycles and lesser overruns of time and cost.
We have continuously benchmarked our processes against world-class standards and
models such as:

Collaboration:
We believe that we do things better when we do it together. We partner with our
customers at every stage of development and support.
Leadership:
In order to be the preferred partners of choice of leading global corporations, we
constantly endeavour to stay ahead of the curve. Our efforts have been recognized and
awarded across numerous industries and geographies.

Agility:
We build processes and systems that allow our operations to be adaptable and flexible to
the dynamic needs of our customers. We innovate rapidly, tailoring solutions that meet
customer needs productively and cost-effectively.

DNA:Building technologies for a Sustainable World

Our vision is to co-build along with our partners, an integrated and sustainable world by
leveraging technology. We combine technology and process expertise to build solutions
for our customers, helping them to bring products faster to their target markets and to
globalize their processes & systems seamlessly.

Merging Focus with Vision

We take pride in our deep understanding of our customer priorities in our focus
industries. Our mission is to be the global partner of first choice for our customers with
leadership in select practice areas.
In our quest to achieve our vision we are guided and governed by seven core values that
we have fondly abbreviated as CRICKET. These values are the foundation on which we
architect our future.

Process excellence:At KPIT, we believe that quality of processes define the level of customer satisfaction.
Hence, we deploy a metrics-driven system for process excellence, which is a continuous
endeavour in our enterprise. It involves necessary changes in processes, introduction of
new tools & techniques, and adoption of best-practices across the organization.
Through our quarterly process review by the management, we identify process
improvement opportunities and corrective & preventive measures. We aim to create

complete customer experiences through high quality standards, transparent practices,

and exhaustive communication mechanism.
As part of this endeavour we foster a strong six sigma culture within the organization. We
have identified Six Sigma as a disciplined, data-driven approach and methodology.

Six Sigma Program Benefits to our Customers

Zero surprises and increased productivity
Improved predictability and quality visibility
Superior customer satisfaction
Awards and Recognition:Awards & Recognition
KPIT Cummins wins Best Performance in Service Delivery award from SAP India
KPIT Cummins wins the prestigious Mahesh Modi Environment Excellence award for
2013
KPIT Cummins wins the 2012 Oracle Excellence Award for Specialized Partner of
the Year - North America in Regional SI/Reseller Applications Momentum category
for demonstrating an outstanding and innovative solution based on Oracle
products
Sparta Consulting, a KPIT Cummins company, positioned in the Niche Players
Quadrant of the Magic Quadrant for SAP Implementation Service Providers, North
America
Sparta Consulting, a KPIT Cummins company, Receives 2012 SAP Partner Impact
Award as SAP Services Partner of the Year - Momentum, North America
SAP honors KPIT Cummins with SAP ACE Awards 2011 'BEST RUN End to End
Business Process'
KPIT Cummins won the 2011 Wall Street Journal Technology Innovation Award in
the Transport category
KPIT Cummins was awarded the EMC Cloud Pioneer Award 2011, for early adoption,
coverage, size and maturity of cloud deployment at KPIT Cummins
KPIT Cummins' REVOLO - Plug in Hybrid awarded Best Implemented Sustainability
Innovation of the Year 2011 by Knowledge@Wharton
Revolo, a smart & sustainable solution for automobiles won the ISA Technovation
Award 2011 for the Best Product of the Year - Other category

Revolo awarded Promising Innovation of the Year 2010-11 by NASSCOM under the
New Technology Advancement category
Parivartan Sustainability Leadership Award 2011 by India Carbon Outlook for
Revolo
Best Electronic Product of the Year 2011 by India Semiconductor Association for
Revolo
Revolo awarded the 'Automotive Idea of the Year' at The Economic Times
Zigwheels Car & Bike Award 2010
KPIT CIO, Shrikant Kulkarni, selected amongst the top 50 most respected CIOs in
India
Anil Patwardhan, VP & Head - Corporate Finance & Governance, KPIT Cummins won
the ICAI 2010 award of the best CFO in Information Technology category
Won the Maharashtra State IT R&D Innovation Award 2010 for Revolo
Awarded the Cummins CMD Award for innovation
"KPIT Cummins are specialists in product engineering design and is one of the
world's leading automotive software developers" - Kevin Mak, Leading Analyst of
the Automotive Electronics Service, Strategy Analytics, on the SA Blog
In the top 10 Engineering Services Vendors list by Global services 100
Profiled in the BI Short listing Tool by Forrester - by Liz Herbert and Boris Evelson
Recognised among top 25 companies in India with excellence in Corporate
Governance for 4 consecutive years by ICSI (Institute of Company Secretaries of
India)
Among best 5 companies by Industry Focus: Automotive - IAOP (International
Association of Outsourcing Professionals)
Among best 20 leaders by services offered: Industry specific - IAOP
Among best 5 companies by Geography Focus: Japan - IAOP
Award for Excellence in Corporate Governance, 2009 ranking by ICSI
Mentioned in the selected list of Oracle and SAP implementation service providers
in North America geography (C&SI Service providers) 2009

KPIT AS A MANUFACTURING COMPANY:-

Manufacturing companies today are striving for agility in operations, seamless

integration of business processes, efficient design and development of new products,
coupled with reduction in time-to-market. Global manufacturers are increasingly
investing in process improvements and reducing operational expenditures, while
maintaining product quality and meeting all safety and regulatory norms.
The engineering demand in manufacturing is undergoing a paradigm shift with urgent
need for intelligent products and technologies, such as concurrent engineering. Similarly
on the business IT side, manufacturing organizations across the globe feel the need for
focused solutions in supply chain optimization, big data, analytics and mobility.
Over the course of the next few years, the industry is expected to experience more
change than what it experienced in the previous decade. Interdependent ecosystems
and integrated enterprises will be challenged to serve intelligent solutions, dynamic
business operations and sophisticated customers.
KPIT provides comprehensive solutions that span the entire manufacturing spectrum and
helps global manufacturers deliver value to their customers, improve their supply chain
visibility and enhance profitability. Our solutions, tools and methodologies allow you to
improve the efficiency of your manufacturing operations. The market segments we serve
include automotive, industrial manufacturing, life sciences, energy and several others.

Our offerings:

Enterprise Resource Planning

Product Lifecycle Management
Value Chain Planning & Execution
Enterprise Performance Management & Business Intelligence
Customer Relationship Management
Global Delivery - 24 x 7 Support, Database & Technology Services

Some of KPITs Solutions for the Manufacturing Industry

include:KPIT K-PRO
K-PRO, from KPIT, is an end-to-end Application Maintenance Support framework that
helps customers reduce their support cost year-on-year and enhances resource
utilization without compromising on end user satisfaction.
Maintaining IT applications is a critical activity for all organizations. Research shows that
organizations spend up to 70 percent of their IT OPEX budget on application
maintenance. Therefore, choosing the right application maintenance framework
becomes a crucial decision.
K-PRO-from KPIT-is an end-to-end Application Maintenance Support framework which
helps customers reduce their support cost year-on-year and enhances resource
utilization without compromising on end user satisfaction. Whether you are a large
enterprise or SMB in the manufacturing and automotive industry, K-PRO can be
customized to suit the specific needs of your organization. The framework addresses
strategic, tactical and operational challenges in running the IT maintenance services.

 Solution Highlights:K-PRO consolidates IT services areas, standardizes IT assets and processes, optimizes
technology and processes along with strong governance. These strategic arms are based
on 5 foundation elements - Processes, Resources, Quality, Continuous Improvement and
Information Intelligence.

KPIT Should Costing:Reduce the cost of bought-out items by using our Extended Enterprise Should Costing
solution. Our end-to-end solution enables you to reduce overall supply chain costs by
reducing procurement, engineering and logistics costs.
KPIT Finished Goods Inventory Management Solution (FINMAN):KPIT Finished Goods Inventory Management Solution (FINMAN) is a robust inventory
management process and solution. It is globally inclusive and responsive to changes in
inventory policies aiming at the next level of inventory maturity for manufacturers.

KPIT Calibration Process Management (C-PROM):As the name suggests, C-PROM is a calibration process management solution from KPIT
that aims at shortening product development/calibration time and reducing cost,
accelerating time to market / assembly line, producing high-quality products with
reduced defects, and synchronizing globally-dispersed and multiple process teams .

OVERVIEW:20+

20+

300+

1500+

Years of rich
expertise

Vehicle
Platforms

Production software
programs

Projects in
automotive

We collaborate with you to achieve what truly matters - delivering strong, compelling
solutions to your customers that inspire loyalty.
Product Innovation and Development: Engineering advanced mobility solutions with
integration of software, mechanical and electronics tools and processes to deliver
reduced timelines, costs and efforts. Our customers also benefit from the investments
that we make in new and relevant technologies. To know more, read about our Product
Engineering Solutions. To know more, read about our Product Engineering Solutions.
Business Consulting and Operations Optimizations: Reducing operating expenses,
maximizing cash flow and delivering enhanced ROI. Our solutions help predict supplydemand variability across the entire value net. To know more, read about our Business
Consulting & IT Solutions.
Enterprise IT Solutions: Turning information into insights on new growth opportunities
and building new revenue models based on higher levels of customer centricity. To know
more, read about our SAP Industry Solutions or Oracle Industry Solutions.

Why co-innovating with us makes great business sense:-

Automotive
Grade services
Members of:-

Certifications:-

Product
development
from concept
to production

Automotive
SPICE Level 5

Experience in
creating
conformance
specifications
for AUTOSAR
standards

PRODUCTS:KPIT has the experience and know-how in building products and solutions for
Automotive, Industrial and Consumer Electronics domains. KPIT has helped its customers
in the areas of navigation, automotive infotainment, telematics, semiconductors etc. We
have been engineering future-proof products and technologies that are solving
tomorrows needs today.
Our deep industry expertise and capability helps our customers address global
challenges of the future.
Learn more about our products:

APLICATION SERVICES:KPIT has in-depth industry experience and expertise in providing application services for
Oracle, SAP and Movex /M3 products and processes, including integration, testing and
maintenance. Our knowledgeable consultants ensure risk-free development and
implementation of applications while improving productivity and compliance.

KPITs applications services ensure your systems work efficiently, thereby maximizing
application functionality. With our cost-efficient, flexible engagement models you will be
able to improve business performance, IT operations and stay competitive. Partner with
KPIT to benefit from our range of application services.

Our application services:

Oracle
SAP
Movex/M3
Microsoft
Infrastructure Management Services

Q1 FY14 USD revenue grew 3.1%

Q-o-Q to reach USD 109 million

Net profit for the quarter up 17.5% Q-o-Q to reach INR 601 million

KPIT Cummins (BSE: 532400; NSE: KPIT), a leading product engineering and IT consulting
partner to automotive & transportation, manufacturing and energy & utilities companies,
today reported its consolidated financial results for the quarter ended June 30, 2013.

Highlights for the quarter ended June 30, 2013

Q1 FY14 growth momentum in line with annual guidance. INR revenue up 7.6% Q-o-Q
and 13.9% Y-o-Y to reach INR 6,132.11 million
USD revenue rises 3.1% Q-o-Q and 11% Y-o-Y to reach USD 108.82 million
Net profits increased 17.5% Q-o-Q to reach INR 601.38 million
PAT margin expanded by 83 bps to 9.81% against 8.98% in the previous quarter
EBITDA margin including the impact of full quarter wage hikes stood at 15.86%
Top 10 accounts including Cummins register impressive 20%+ Y-o-Y growth
An umbrella patent for the overall REVOLO Solution granted in the US

Research Design & Methodology

Research Methodology:The term research is composed of two words, re & search. This means to search
again. Research is conducted to search for new facts of to modify the existing facts. The
obvious function of research is to add new knowledge to the existing store. Research is
the pursuit of truth with the help of study, observation, comparison and experiment. It is
a careful and exhaustive investigation of phenomenon with an objective of advancing
knowledge.

Thus, research plays two major roles viz;

1) It contributes to the general fund of existing knowledge.

2) It helps to solve many complex problems faced by the business and society

According to Clifford Woody, research is the process which includes defining and
refining problems, formulating suggested solutions, collecting, organising &
evaluating data, making deductions & reaching conclusion & at last carefully testing
the conclusion & reaching conclusion & at last carefully testing the conclusion to
determine whether they fit the formulating the hypothesis.

Steps in conducting research

Research is often conducted using the hourglass model

structure of research. The hourglass model starts with a broad spectrum for research,
focusing in on the required information through the method of the project (like the neck
of the hourglass), then expands the research in the form of discussion and results. The
major steps in conducting research are:-

Identification of research problem

Literature review

Specifying the purpose of research

Determine specific research questions or hypotheses

Data collection

Analyzing and interpreting the data

Reporting and evaluating research

The steps generally represent the overall process; however they should be viewed as an
ever-changing process rather than a fixed set of steps. Most researches begin with a
general statement of the problem, or rather, the purpose for engaging in the study. The
literature review identifies flaws or holes in previous research which provides justification
for the study. Often, a literature review is conducted in a given subject area before a
research question is identified. A gap in the current literature, as identified by a
researcher, then engenders a research question. The research question may be parallel
to the hypothesis. The hypothesis is the supposition to be tested. The researcher(s)
collects data to test the hypothesis. The researcher(s) then analyses and interprets the
data via a variety of statistical methods, engaging in what is known as Empirical
research. The results of the data analysis in confirming or failing to reject the Null
hypothesis are then reported and evaluated. At the end the researcher may discuss
avenues for further research.

SOURCES OF DATA
The collection of data means purposive gathering of information relevant to the
subject matter of investigation from the units of population under investigation.

Required data for the proposed study was collected by following sources of data
collections.

1) Primary sources
2) Secondary sources

1) Primary sources:The primary data are those which are collected afresh
at for the first time & thus, it is original in character. For the concerned study data was
collected through enquiry, personal interview & discussion with officers.
A primary source is an original object or
document -- the raw material or first-hand information. Primary sources include historical
and legal documents, eyewitness accounts, results of experiments, statistical data,
pieces of creative writing, and art objects. In the natural and social sciences, primary
sources are often empirical studies -- research where an experiment was done or a direct
observation was made. The results of empirical studies are typically found in scholarly
articles or papers delivered at conferences, so those articles and papers that present the
original results are considered primary sources.

3) Secondary sources:The data collected from the published

sources of organisation is called secondary data. Secondary sources that were referred
for the project work are as under.

I.
II.

Accounting and Financial records.

Annual Reports Of Company.

III.

Various books of Management and Financial Accounting.

IV.

Internet and Published Data viz. Journals, Magazines of

Company.

A secondary source is something written about

a primary source. Secondary sources include comments on, interpretations of, or
discussions about the original material. You can think of secondary sources as secondhand information. If I tell you something, I am the primary source. If you tell someone
else what I told you, you are the secondary source. Secondary source materials can be
articles in newspapers or popular magazines, book or movie reviews, or articles found in
scholarly journals that discuss or evaluate someone else's original research
These records
Management.

were

readymade

but

made

available

with

prior

permission

Limitations:
The research was conducted in limited area.
The study done with limited information provided by Finance
Department.

of

INTRODUCTION OF
TOPIC

INTRODUCTION OF TOPIC
Meaning of Financial Analysis:Financial Analysis is the process of identifying the financial strengths and weaknesses of
the firm by property-establishing relationship between the items of the Balance Sheet
and the Profit and Loss account. There are various methods or techniques are used in
analysing financial schedule of change in working capital flow, cost volume Profit
Analysis and Ratio Analysis.

MEANING OF FINANCIAL ANALYSIS:-

The meaning of Financial Analysis is also known as analysis refers to the process
of determining according to Meta fund tutored is a process of evaluating the
relationship between components parts of a financial statements to obtain a better
understanding of a firm's position and performance. In the word of Myers "Financial
statements analysis is largely a study of relationship among the various financial factors
in a series of statements". The purpose of financial statements so as to judge
the profitability and financial soundness of the firm.
To analyse is to examine. Therefore, analysis of financial
statements means the systematic classification, comparison and examination of the
facts and figures as disclosed in these statements in order to have the full diagnosis of
the profitability and financial position of the enterprise.
A profit and Loss statement indicates the profitability and Balance
Sheet discloses the financial position. When the absolute figures in these statements are
methodically classified and compared with similar figures of the previous years or with
the figures of other firms for proper understanding of the profitability and position of the
business, it is known as analysis.

DEVICES OF FINANCIAL ANALYSIS:

There are several methods for determining the financial analysis
of the company. They are as follows:-

1.
2.
3.
4.

Comparative Statement
Tr e n d A n a l y s i s
Common size Statement
Fu n d s F l o w S t a t e m e n t

Financial analysis (also referred to as financial

statement analysis or accounting analysis or Analysis of finance) refers to an assessment
of the viability, stability and profitability of a business, sub-business or project.
It is performed by professionals who prepare reports using ratios that make use of
information taken from financial statements and other reports. These reports are usually
presented to top management as one of their bases in making business decisions.

Continue or discontinue its main operation or part of its business;

Make or purchase certain materials in the manufacture of its product;

Acquire or rent/lease certain machineries and equipment in the production of its

goods;

Issue stocks or negotiate for a bank loan to increase its working capital;

Make decisions regarding investing or lending capital;

Other decisions that allow management to make an informed selection on various

alternatives in the conduct of its business.

 Goals
Financial analysts often assess the following elements of a firm:
1. Profitability - its ability to earn income and sustain growth in both the short- and longterm. A company's degree of profitability is usually based on the income statement,
which reports on the company's results of operations;
2. Solvency - its ability to pay its obligation to creditors and other third parties in the
long-term;
3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate
obligations;
Both 2 and 3 are based on the company's balance sheet, which indicates the financial
condition of a business as of a given point in time.
4. Stability - the firm's ability to remain in business in the long run, without having to
sustain significant losses in the conduct of its business. Assessing a company's stability
requires the use of the income statement and the balance sheet, as well as other
financial and non-financial indicators. Etc.

Nature of Financial Statements:A financial statement (or financial report) is a formal record of the financial activities of a
business, person, or other entity.
For a business enterprise, all the relevant financial information, presented in a structured
manner and in a form easy to understand, are called the financial statements.
The Financial Statements are those which are prepared periodically,
normally at the end of financial year. All the information recorded in the books of
accounts of business is summarized in these financial statements.
They typically include four basic financial statements,
accompanied by a management discussion and analysis:

1. Balance sheet:Also referred to as statement of financial position or condition,

reports on a companys assets, liabilities, and Ownership equity at a given point in time.

2. Income statement:Also referred to as Profit and Loss statement (or a "P&L"),

reports on a companys income, expenses, and profits over a period of time. Profit & Loss
account provide information on the operation of the enterprise. These include sale and
the various expenses incurred during the processing state.

3. Statement of retained earnings:Explains the changes in a companys retained earnings over

the reporting period.

4. Statement of cash flows:-

Reports on a companys cash flow activities, particularly

its operating, investing and financing activities.

PURPOSE OF FINANCIAL STATEMENTS

"The objective of financial statements is to provide information about the financial
position, performance and changes in financial position of an enterprise that is useful to
a wide range of users in making economic decisions. Financial statements may be used
by users for different purposes:

Owners and managers require financial statements to make important

business decisions that affect its continued operations. Financial analysis is then
performed on these statements to provide management with a more detailed
understanding of the figures. These statements are also used as part of
managements annual report to the stockholders.

Employees also need these reports in making collective bargaining

agreements (CBA) with the management, in the case of labour unions or for
individuals in discussing their compensation, promotion and rankings.

Prospective investors make use of financial statements to assess the

viability of investing in a business. Financial analyses are often used by investors
and are prepared by professionals (financial analysts), thus providing them with
the basis for making investment decisions.

Financial institutions (banks and other lending companies) use them

to decide whether to grant a company with fresh working capital or extend debt
securities (such as a long-term bank loan or debentures) to finance expansion and
other significant expenditures.

Government entities (tax authorities) need financial statements to

ascertain the propriety and accuracy of taxes and other duties declared and paid
by a company.

Vendors who extend credit to a business require financial statements

to assess the creditworthiness of the business.

Media and the general public are also interested in financial

statements for a variety of reasons.

 Methods
Financial analysts often compare financial ratios:

Past Performance - Across historical time periods for the same firm (the last 5 years
for example),

Future Performance - Using historical figures and certain mathematical and

statistical techniques, including present and future values, this extrapolation method
is the main source of errors in financial analysis as past statistics can be poor
predictors of future prospects.

Comparative Performance - Comparison between similar firms.

Need for Financial Analysis:Typically, a systems analyst does not need

to be concerned with the day-to-day financial operations of an organization. There are
specialists in most companies that are responsible for business functions such as
accounting, payroll and auditing. The financial aspects of all organizations are critical
to the long term viability of that organization. Commercial enterprises have to show a
profit or they won't be in business for very long. Although government/non-profit
organizations are not required to make a profit, they still have to manage their
funding to provide the required services. For many non-profit organizations, the
requirements for services are increasing at the same time their expenses are
increasing. These organizations need to increase their efficiency just to continue to
provide a constant level of services.
To demonstrate financial viability of a new system, several common techniques
are utilized. A payback analysis is used to determine how long it will take to repay an
investment. This can only be calculated if the future benefits outweigh the costs.
A return on investment (ROI) analysis will determine the percentage returned
on the total costs of the system. The ROI can be calculated even if the costs outweigh
the benefits.
A present value (PV) analysis is similar to the ROI calculation except that it also
considers the time value of money. A dollar today does not have the same value as a
dollar five years from now. The PV takes this into account whereas the other two
analyses do not.

1. Funds Flow Analysis:

Every business concern, at the end of its financial period, prepares Income Statements
and Balance Sheet. Income Statements show the net result, Net Profit, of the business
operations and contains various expenses incurred and losses and revenue earned
during that period. Balance Sheet gives a summary of assets and liabilities as on a
particular date and show the financial position of the business. The liabilities side of a
balance sheet shows the sources from where funds are raised and the assets side shows
how the funds raised are utilized. But it does not show the causes or reasons for
changes in assets and liabilities, flow of funds, between two balance sheet dates.
Therefore, a statement is prepared in addition to the Income Statements and Balance
Sheet, to show changes in assets and liabilities between two balance sheet dates, which
is known as Fund Flow Statement. It is a statement, also known as Statement of
Changes in Financial Position, designed to analyse the changes in financial condition of a
concern between to specified dates.
The success of business beside other things depends upon the manner in which its
Fund Flow is managed. Thus, Fund Flow is required as the life and blood of business
concern. Fund Flow management in simple term is the flow of funds which a company
must have to finance its day to day operation.
Fund Flow management throws light on adequacy of the firm and also risk of
bankruptcy. If firm do not have adequate Cash i.e. it does not invest sufficient funds in
current assets, it may become liquid and consequently may not have ability to meet its
current as well as long term obligation and thus, invite risk of bankruptcy. It also focuses
on key strategy and consideration trade-off between profitability and liquidity of the
firm.

The technique of fund flow analysis is widely used by the financial analysts
credit grating institution and financial managers in performance of their jobs. It has
become a useful tool in their analytical kit. This is because the financial statement i.e.
Income Statement and the Balance Sheet have limited role to perform. Income
statement measures fallow restricted to transaction that pertain to rendering of goods or
services to customers. The balance sheet is merely a static statement .it is a statement
of assets and liabilities of the business as on particular date. It does not sharply focus
those major financial transactions which have been behind the balance the sheet
changes. One has to draw inferences from the balance sheet of two periods. For
example, if the fixed assets worth Rs. 2, 00,000/- are purchased during the current year
by raising share capital of Rs. 2, 00,000/- the balance sheet will similarly show a higher
capital figure and higher fix assets figure. In case, one compares the current years
balance sheet with the previous years balance sheet, then only one can draw an
inference the fixed assets were accounting year might not find any place in the balance
sheet.
For example loan of Rs. 2, 00,000/- was raised and paid in the accounting year.
The balance sheet will not depict this transaction. However, a financial analyst must
know the purpose for which loan was utilized and the source from which it was raised.
This will help him in making a better estimate about companys financial position and
policies.

Types of financial analysis

There are various types of users like investors, creditors, customers, financial
institutions, employees, potential investors, government and general public analyze the
financial reports in different angles for different purposes. However all kinds of analysis
can be classified on the basis of their users and the method of operations followed in the
analysis.
Here is a chart which describes it better.

External Analysis
The name itself suggests that this type of analysis is done by the outsiders who do not
have access to the detailed accounting information of the business firm. For this type of
analysis external users like investors, creditors, credit agencies, general public etc.
mostly rely on the published financial statements.

Internal Analysis
This analysis is performed by the executives and employees of the business firm. They
have full access to all internal accounting records of the business concern. They do all
these analysis only for the management of the business enterprises.
On the basis of method of operations followed in the analysis we can again categorize
analysis in to dynamic or horizontal analysis and static or vertical analysis.

Dynamic Analysis
In this analysis the financial data of the company is compared for several years. A base

year which is normally the beginning year is chosen and the financial data of various
years are compared with the standard or the base year. Dynamic analysis helps the
management and other users to find out the trend of items of financial statements that
have changed significantly during the period. Comparison of an item over several
periods with the base year may show a trend developing. Comparative statements and
trend percentages are two tools used in dynamic analysis.

Static Analysis
Static analysis refers to study of relationships of various items in the financial statement
of one financial year only. In static analysis items of financial statement of a year are
compared with the base selected from the same year's statement. Common-size
financial statements and financial ratios are two tools used in static or vertical analysis.
As items for one time period are taken for analysis in static analysis so it is not conducive
for proper analysis of financial statements. However it may be analyzed with dynamic
analysis to make it more meaningful and effective
Meaning of Funds:The term Fund can be explained in many ways. In the narrow sense, it means
cash only. Transactions involving cash receipts and payments are considered in
this approach. In the broader sense, fund means working capital, which is the
excess of current assets over current liabilities. For fund flow analysis, the broader
approach, working capital approach, is considered. The entire liability side of the
balance sheet shows the applications of funds, whereas the entire liability side
shows the sources of funds. But while preparing funds flow statement it is
preferred to use the term in the intermediate sense, i.e. working capital.
The word Flow means change and fund flow means change in funds or
change in working capital. Any increase or decrease in working capital is flow of funds.
Flow of funds may be either inflow of funds or outflow of funds. Inflow refers to sources of
funds and outflow refers to applications of funds. If a transaction brings any change in
working capital, flow of funds takes place. This will happen when changes occur in the
values of fixed assets, share capital, long term debts etc.

Benefits of Fund Flow Information:The information in fund flow statement helps investors, creditors, and other
to assess the following aspects of the firms financial position.

1. Such statement serves as a mechanism for predicting the ability to generate future
fund flows for the investors, creditors and others.
2. This enables managers or management to plan coordinate and control financial
operation in an effective manner.
3. It gives an indication of the relationship between profitability and cash generating
ability thus of the quality of the profit earned.
4. It furnishes information to the management regarding the entities ability to pay
dividend and meet obligations.
5. Analyst and other users of financial information often, formally or informally, develop
models to assess and compare the present value of the Future Fund Flow of entities.
Historical Fund Flow statements could be useful to check the accuracy of past
assessment.
6. It is free from manipulation and is not affected by subjective judgements or by
accounting policies.

7. Such a statement dictates situation when business has made profit but has run out
money or it has sustained loss but has enough fund availability.
8. The extent of fund generated from operational activity and external finance in order to
meet capital, tax , and dividend requirements can be obtained from such statements.
9. It aids in the evaluation of risk, which includes both the expected variability of future
return and probability of insolvency or bankruptcy.
10. Such statements reveal the capability of an enterprise to pay its short obligation as
and when due to the lenders.
11. A Fund Flow statements in conjunction with a balance sheet provides information on
liquidity, viability and adaptability. The balance sheet is often used to obtain information
on liquidity, but the information is rather incomplete for this purpose as the balance
sheet is prepared at a particular point in time.
12. It may assists users of financial statements in making judgements on the amount,
timing and degree of certainty of future Fund Flows.
13. This statement provides information that is useful in checking the accuracy of past
assessment of future Fund Flows and in examining the relationship between profitability
and net fund Flow and the impact of changing price.
14. This statement is of special importance in assessing future Fund Flows, quality of
income operating capability, financial flexibility, liquidity and information on financing
and investing activities. Using Fund Flows from operating activities from the Fund Flow
statements, different ratios such as liquidity ratio, solvency ratio and profitability ratios
can also be calculated to evaluate an enterprise liquidity, solvency and profitability.

Fund Flow Statement And Income Statements:A Fund Flow statements differs from an income statement (i.e. Profit and Loss account) in
several respects
1. A Fund Flow statement deals with the financial resources required for running the
business activities. It explain how were the funds obtained and how were they used,
whereas an income statement discloses the result of the business activities i.e. how
much has been earned and how it has been spent.
2. A Fund Flow statement matches the Funds Raised during a particular period. The
sources and application of funds may be of capital as well as of revenue. An income
statement matches the income of period with the expenditures of that period which are
both of revenue nature. For example where shares are issued for cash, it becomes a
source of funds while preparing a fund flow statements but it is not an item of income for
an income statement.

3. Sources of funds are many beside operations such as share capital, debentures sales
of fixed assets, etc. an income statements which discloses the results of operation
cannot accurately tell about the funds from operation alone because of non-fund item
(such as depreciation, written off on fictitious assets etc.) being include therein.
Thus, both income statement and fund flow statement have different
function to perform. Modern management need both. One cannot be substituted for the
other rather they are complementary to each other.

USES OF FUND FLOW STATEMENTS:

Fund Flow statements helps the financial analysts in having a more detailed and
understanding of changes in distribution of resources between two balance sheet date in
case such study is require regarding the future working capital position of the company.

The uses of fund flow statement can be put as follows:1. It explains the financial consequences of business operation:
Funds flow statement provides a ready answer to so many conflicting situations such as:
a) Why the liquid position of the business is becoming more and more unbalanced in
spite of business making more and more profits?
b) How was it possible to dispute dividends in excess of current earning or in the
presence of a net loss for the period?
c) How the business could have good liquid position in spite of business making losses or
acquisition of fixed asset?
d) Where have the profit gone?
Definite answer to those question will help the financial analyst in advising his employer
or client regarding direct of funds to those channels will be most profitable for the
business.

It answers intricate queries:

The financial analyst can find out answer to a number of intricate questions:
a) What is overall creditworthiness of the enterprises?
b) What are the sources of repayment of the loans taken?
c) How much funds are generated through normal business operation.
d) In what way the management has utilized the funds in the past and what are going to
be likely uses of funds?

It acts as instruments for allocation of resources:

A projected fund flow statement will help the analyst in finding out how the management
is going to allocate the scarce resources for meeting the productive requirements of the
business. The use of funds should be managed in such a way that business is in a
position to make payment of interest and loan instalments as per agreed schedule.

It is a test as to effective or otherwise use of working capital:

Fund flow statement is a test of effective use of working capital by the
management during a particular period. The adequacy or inadequacy of working capital
will tell the financial analyst about the possible steps that he management should take
for effective use of surplus working capital or making arrangement in case of inadequacy
of working capital.

Fund Flow statement and income statement:

A Fund flow statement differs from an income statement (i.e. Profit and Loss account) in
several respects.
1) A Fund Flow statement deals with the financial resources required for running business
activities. It explain how were the funds obtained and how were they used, whereas an
income statement discloses the result of the business activities i.e. how much has been
earned and how it has been spent.
2) A Fund Flow statement matches the Funds Raised and Funds Applied during a
particular period. The sources and application of funds may be of capital as well as of
revenue. An income statement matches the income of period with the expenditures of
that period which are both of revenue nature. For example where shares are issued for
cash, it become a source of funds while preparing a funds flow statements but it is not an
item of income for an income statement.
3) Sources of funds are many besides operations Such as share capital, debentures sales
of fixed assets, etc. an income statement which discloses the results of operation cannot
accurately tell about the funds from operation alone because of non-fund item (such as
depreciation, writing off of fictitious asset, etc.) being include therein.

Thus, both income statement and fund flow statement have different function to
perform. Modern management need both. One cannot be substituted for the other rather
they are complementary to each other.

Sources & Application of Funds:

The sources of fund can be both internal as well as external.

Internal sources:

Funds from operation are the only internal sources of funds. However, following
adjustments will be required in the figure of net profit for finding out real funds from
operation:

Add the following items as they do not result in outflow of funds:

1. Depreciation on fixed assets
2. Preliminary expenses or goodwill, etc., written off.
3. Contribution to debenture redemption fund ,transfer to general reserve , etc. , if they
have been deducted before arriving at the figure of net profit.
4. Provision for taxation and proposed dividend are usually taken as appropriation of
profits only and not current liabilities for the purpose of funds flow statement. Tax or
dividends actually paid are taken as application of funds. All these items will be added
back to net profit. If already deducted, to find funds from operation.
5. Loss on sale of fixed assets. Deducted the following times as they do not increase
funds:a. Profit on sale of fixed assets since the full sales proceeds are taken as separate
source of funds and inclusion here will result in duplication.
b. Profit on revaluation of fixed assets.
c. Non operating income such

External Sources:
Funds from long-term loan:
Long term loans such as debentures borrowing from financial institution will increase
the working capital and therefore, there will be flow of funds. However, if the debenture
has been issued in consideration of some fixed assets, there will be no flow of funds.
Sale of fixed asset:
Sale of land building, long term investments will result in generation of funds.

Funds from increase in share capital:Issue of share for cash or for any current asset results in increase in working and
hence there will be a flow of funds.

Application of funds:
The uses to which funds are put are put are called application of funds following are
some of the purpose for which funds may be used.

Purchase of fixed asset:

Purchase of fixed assets such as a land, building, plant, machinery, long term
investment, etc., result in decrease of current assets without any decrease in current
liabilities. Hence there will be a flow of funds. But in case shares or debentures are
issued for acquisition of fixed assets. There will be no flow of fund.

Payment of dividends:Payment of dividend result in decrease of fixed liability and therefore, it affects funds.
Generally, recommendation of director regarding declaration of dividend (i.e. proposed
dividend) is simple taken as an appropriation of profit and not as an item affecting the
working capital.

Payment of tax liability:

Provision for taxation is generally taken as an appropriation of profit and not as an
application of funds. But if the tax haws were paid it will as an application of funds.

B) CASH FLOW ANALYSIS:Before studying Cash Flow Statement it is necessary to understand

the terms viz; Cash, Cash Flow.

 Cash:
As per Cash Flow Statement deals with cash and cash equivalents. Cash
includes cash in hand and demand deposits with bank. Cash equivalents refer to short
term liquid investments of an organization which are readily convertible to known
amounts of cash and are subject to an insignificant risk of change in value. These cash
equivalents include item like Fixed Deposit for 30 days, treasury bills and market
instrument.

Cash Flow:
The success of business beside other depends upon the manner in which its Cash flow is
managed. Thus, Cash flow is required as the life and blood of business concern. Cash
Flow management in simple term is the flow of funds which a company must have to
finance its day to day operation.
It includes the form near cash asset or even assets a little further from cash but yet in
process of moving towards the cash from in short period. It comprises of stock of finished
goods, semi-processed items, sundry debtors, cash and short-term investment, if any.
Cash flow management throws light on adequacy of the firm and also risk of bankruptcy.
If firm do not have adequate Cash i.e. it does not invest sufficient funds in current assets,
it may become liquid and consequently may not have ability to meet its current
obligation and thus, invite risk of bankruptcy.
It also focuses on key strategy and consideration trade-off between profitability and
liquidity of the firm. Management of Cash flow gives financial position, profitability and
also efficient use of an individual current asset like cash, receivables and inventory.

Cash Flow Statement:

In financial accounting, a cash flow statement or statement of cash flows is a
financial statement that shows how changes in balance sheet and income accounts
affect cash equivalents, and breaks the analysis down to operating, investing, and
financing activities. 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 statement.
The success, growth and survival of every reporting entity depend on its ability to
generate or otherwise obtain cash. Cash flow is a concept that everyone understands
and with they can identify. Reported profit is important to users of financial statement,
but so too is the cash flow generating potential of an enterprise. What enables an entity
to survive is the tangible resource of cash not profit, which is merely one indicator of
financial performance. A cash flow statement (CFS) is important to external users, and
should be of significant importance internally as well. Cash Flow refers to the movement

of cash into or out of a business, or project, or financial product. It is usually measured

during a specified, finite period of time. Measurement of cash flow can be used.
To determine a projects 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 businesss liquidity. Being profitable does not
necessarily mean being liquid. A company can fail because of a shortage of cash,
even while profitable.
As an alternate measure of businesss profits when it is believed that accrual
accounting concepts do not represent economic realities. For example, accompany
may be notionally profitable but generating little operational cash ( as may be the
case for a company that barters its products rather than selling for cash). In Such a
case, the company may be deriving additional operating cash by issuing shares, or
raising additional debt finance.
Cash Flow can be used to evaluate the quality of income generated by accrual
accounting. When Net Income is composed of large non-cash items it is considered
low quality.
To evaluate the risks within a financial product. E.g. matching cash requirements,
evaluating default risk, re-investment requirement, etc.
Cash flow is one of the most important aspects of running any business large or
small. It is one of the single most important reasons why many business fail-regardless of
how good the business is. Managing cash flow therefore is vitally important in the
smooth running, survival and success of business. This activity will look at what cash
flow is, and use some examples to show how cash flow can make the difference between
success and failure. Failure in this case means insolvency. If you are insolvent then you
are unable to pay your debts. We often use the term bankrupt to describe this but
strictly, only an individual can be declared bankrupt. Companies are declared as
insolvent. The principle however is the same. Some firms deal with so called personal
insolvency which effectively means bankruptcy so the use of the terms can sometimes
be confusing!
Business success might not be determined by how many customer you have, the
quality of your product, the price or many other things it might be down to simple case
of managing your cash flows!

Need and Importance:

The Balance Sheet and Profit and Loss Account are the two very important final
products of the entire financial accounting process. The balance sheet shows the
financial state of affairs of an organization as on a particular date while the profit and
loss account shows the profit earned or loss incurred by an organization from its
transactions over a period. No doubt, these two statements serve various important
purpose but they do not tell the complete story which a financial analyst need to know.
The Balance Sheet shows the cash balance as on a particular date. It may show
opening and closing cash paid during the year. For analysis of financial position of
an organization, sometimes this information is essential. This limitation of balance
sheet is overcome by cash flow statement.
Similarly, the Profit and Loss Account which is another which is another important
financial statement shows the book profit earned by a concern. Such profit is calculated
after debiting non-cash expenditure like depreciation, preliminary expenses written off
etc. this book profit is different from cash profit earned by the concern. The financial
analyst who is interested in knowing the cash profit has to adjust such book profit for
noncash expenses to arrive at cash profit.

Classification of Cash Flow:

Cash flow is classified into:
1) Operational cash flows:
Cash received or expanded as a result of the companys internal business
activity. It includes cash earning plus changes to working capital. Over the medium term
this must be net positive if the company is to remain solvent.

2) Investment cash flows:

Cash received from the sale long-life assets, or spent on capital
expenditure (investment, acquisition and long-life assets).

3) Financing cash flows:

Cash received from the issue of debt and equity, or paid out as dividend,
share repurchase or debt repayment.

Activity

Cash Flow

Examples

Operating
Activity

Cash Inflow
Cash Outflow

Receipts from goods, services,

debtors
Payment towards goods,
services, debtors

Investing
Activity

Cash Inflow
Cash Outflow

Receipts from sale of fixed

assets/investments
Paid for purchase of fixed
assets/investments

Financing
Activity

Cash Inflow
Cash Outflow

Receipts from fresh

shares/debentures/loans
Repayment of
shares/debentures/loans

Cash Flow activities:

The cash flow statement is partitioned in to three segments, namely: cash flow
resulting from operating activities, and cash flow resulting from investing activities, and
cash flow resulting from financing activities.
The money coming into the business is called cash inflow, and money
going out from the business is called cash out flow.

Operating activities:
Operating activities include the production, sales and delivery of the companys
product as well as collecting payment from its customer. This called include purchasing
raw materials, building inventory, advertising and shipping the product.

Operating cash flows include:

Receipts from the sale of goods or services.

Receipts for the sale of loans, debt or equity instrument in a trading portfolio.

Interest received on loans.

Dividends received on loans.

Payment to suppliers for goods and services.

Payments to employees or on behalf of employees.

Interest payment.

Items which are added back to [or subtracted from, as appropriate] the net
income figure (which is found on the Income Statement) to arrive at cash flows from
operations generally include:

Depreciation (loss of tangible asset value over time)

Deferred tax
Amortization (loss of intangible asset value time )
Any gains or losses associated with the sale of a non-current asset, because
associated cash flows do not belong in the added back from the income statement.

Investing activities:
Examples of investing activities are:

Purchase of an asset (assets can be land, building, equipment marketable

securities, etc.)
Loans made to suppliers or customer.

Financing activities:
Financing activities include the inflow of cash from investors such as banks and
shareholders, as well as the outflow of cash to shareholders as dividends as the company
generate income. Other activities which impact the long-term liabilities and equity of the
company are also listed in the financing activities section of the cash flow statement.

Proceeds from issuing shares

Proceeds from issuing short-term or long-term debt
Payments of dividend
Payments for repurchase of company shares
Repayment of debt principle, including capital leases

For non-profit organizations, receipts of donor-restricted cash that is limited to long-term

purposes:

Dividends paid.
Sale or repurchase of the companys stock.

Money flowing out of the business:

It should be clear from what we have said so far that the business will have
to pay out money in order to carry out its activities. This is its expenditure.
A business has a responsibility to pay all sorts of bills in carrying out its activities.
In our simple example we have tried to keep the amount of information to a minimum. In
a real business the firm will be paying out for all sorts of things. This will include paying
costs, heating, and lighting. Telephone bills, rates and so on.
Some of these costs have to be paid monthly, others perhaps every three months,
some might be paid yearly and in some cases costs might be incurred every day. In
many cases, the business will know when it has bills that it has to pay.
The people to whom a business owes money are called the creditors. If you
enter into an agreement as a business with a creditor, you have an obligation to pay
them. If this happens with lots of creditor then this could be the thing that causes the
firm to become insolvent.

Money flowing into business:

To balance this out, the firm receives money from selling its goods and services.
In our simple example, FRUIT 20 receives revenue from selling fruit. The revenue they
receive depends on the amount they sell (Q) and the price that they charge (P). We can
say That Revenue (TR) = P x Q.
Bills will arise for all sorts of thing - they all represent a flow of money out of the
business and the business has to make sure it has enough cash to cover these debts
when they are due.
Some business does not receive their revenue on such a regular basis. It will depend on
the agreement they have with their customers. IF a business is involved in selling goods
to another business, for example, there might be an agreement that they will receive
payment for goods supplied every 28 days, or possibly 3 months; it might be 6 month or
even annually.
A firm will normally send an invoice to its customers to notify them how much they
owe. The people who owe money to a firm are called debtors. Payments do not always

arrive when they should, however, which can be the start of the cause of cash flow
problems.
Some firms might see revenue rise at certain times of the year but at other times
sales might be very slow. Toy shops for example, might expect to receive the vast
majority of the revenue from sales in the period from September to December. The
period from February to August might be very slow.
Revenue, therefore, does not come in at the same time as costs have to go out. This
is the main problem facing firms and the whole point about cash flow. A firm has to
manage its cash to ensure that it has enough money coming in to pay its bills. If it
cannot pay a bill for some reason, it could perhaps negotiate with the creditor to delay
the payment. However, it cannot keep doing this!
The importance of Cash flow planning is linked to liquidity of a business. In any
business, there is need for cash in running day-to-day operations. Some examples
include purchase of office stationary or fuel.

Cash flow is simply Cash Receipts minus cash Disbursements. That

means cash in versus Cash out.
Purpose:
The cash flow statement was previously known as the statement of changes in
financial position or flow of funds statement. The cash flow statement reflects a firms
liquidity or solvency.
The balance sheet is a snapshot of a firms financial resources and obligation at a
single point in time, and the income statement summarizes a firms 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 transaction that does not directly affect cash
receipts and payments. These noncash transactions include depreciation or write-offs on
bad debts 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 firms liquidity and solvency and its ability to change cash
flows in future circumstances.
Provide Additional information for evaluating changes in assets, liabilities and
equity.
Improve the comparability of different firms operating performance by eliminating
the effects of different accounting methods.

Difference between Funds flow & Cash Flow:

Fund Flow Statement

It indicates change in working
capital between the two
periods.

Cash flow statement

It indicates change in cash
position between the two
periods.

Schedule of changes in
working capital is prepared.

Schedule of changes in
working capital is not
necessary.

Opening and closing balance

of cash are not taken directly.

Cash flow statement starts

with opening cash balance &
ends with closing balance.

Funds from operations are

ascertained while preparing
funds flow statement.

Cash from Operations is

ascertained while preparing
cash flow statement.

It is the managerial tool of

financial analysis to help long
term decisions.

It is the managerial tool of

financial analysis to help short
term decisions.

Inflow of funds does not mean

inflow of cash.

Inflow of cash however result

inflow of funds.

Sound funds position does not

mean sound cash position.

Sound position however is

always followed by sound

position.

DATA PRESENTATION,
ANALYSIS AND
INTERPRETATION

Data Presentation, Analysis and Interpretation

Statement of changes in working capital
For the year ended
31.03.2011
Particular

2010
Rs.

2011
Rs.

Changes in working capital

Increase

Decrease

A. Current Asset:Sundry debtors

999,123,343

1,608,923678

609,800,335

--

Loans & advances

647,207,254

956,948,967

309,741,713

--

Increase in cash and

equivalents

00

838,631,303

1,64,63,30,59
7

3,40,45,03,948

Total (A)
B. Current Liability:-

838,631,303

253,412,060

Current liability and

provision

849,006,989

849,006,989
TOTAL (B)

1,102,419,04
9

--

1,102,419,04
9

79,73,23,608
2,30,20,84,899

Working capital (A-B)

Increase In working
capital

1,50,47,61,29
1
2,30,20,84
,899

1,50,47,61,29
1
1,75,81,73,351
2,30,20,84,899

1,75,81,73,35
1

CALCULATION OF FUNDS FROM OPERATION

AS ON 31ST MARCH 2011
PARTICUAR

AMOUNT

TOTAL
AMOUNT

Net Profit:-

789,428,334

Add:- Non fund and non-operating

items:(debit items of p & l a/c )
Loss on sale of fixed asset
Depreciation/amortisation
Employee stock option cost
Interest and financial charges
Provision for doubtful debts
Bad debts written off

1,749,134
350,904,135
374,984
40,730,424
1,888,537
630,910

1,18,57,06,45
8

Total (A)

Less:- Non fund and non-operating

items:(credit item of p & l a/c )
Interest and financial charges
Provision for doubtful debts
(advance)
Dividend income
Exchange difference on translation
of currency (cash)
Unrealised foreign exchange (gain)

39,62,78,124

31,208,130
7,800,000
33,940,152
23,988,038
27,592,743
12,45,29,063

Total (B)
Total (A) Total (b) =Funds
generated from operation:-

FUNDS FLOW SATEMENT

12,45,29,063

1,06,11,77,39
5

For the year ended 31st march 2011

SOURCES
Fund from operation
Proceeds from sale
of fixed asset
Sale of mutual fund
investment
Interest received
Dividend
received
from M.F. investment
Maturity
of
fixed
deposit
Issue of share capital
Application
money
received
Loan from working
capital
Short term loan
Increase in finance
lease obligation
Exchange gain

AMOUNT

APPLICATION

1,061,177, Increase in working

395
capital
Taxes paid
2,602,541 Purchase of fixed
271,625,7 asset
01
Investment in
subsidiary
20,700,54 Payment of term loan
9
Expenses on share
issued
33,940,15 Dividend paid
2
Interest &finance
38,655,26 charges
3
1,231,710,
002
1,994,184
134,968,0
62
39,364,50
0

AMOUNT
1,504,761,
291
171,880,2
25
380,948,5
38
447,806,8
30
225,504,8
50
30,376,41
0,
64,327,61
8
41,088,13
8

5,967,513
23,988,03
8

2,86,66,93
,900

2,86,66,93
,900

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31ST MARCH 2011
PARTICULARS
A]

MARCH
31,2011
AMOUNT

MARCH
31,2010
AMOUNT

789,428,33
4

901,725,46
1

1,749,134
350,904,13
5
374,984
40,730,424
(31,208,13
0)
1,888,537
630,910
(7,800,000)
(33,940,15
2)
(23,988,03
8)

15,632,948
281,742,23
6
16,684,594
61,677,340
(41,979,52
5)
(727,210)
2,617,488
11,800,000
(10,462,44
8)
27,742,044
(131,647,0

CASH FLOWS FROM OPERATING

ACTIVITIES:-

Net profit
Adjustments for:(Profit amt.) / Loss amt.
Loss on sale of fixed asset
Depreciation/amortisation
Employee stock option cost
Interest and financial charges
Interest income
Provision for doubtful debts
Bad debts written off
Provision for doubtful debts (advance)
Dividend income
Exchange difference on translation of
currency
Unrealised foreign exchange (Gain) / Loss
Operating profit before changes in

working capital
Adjustment for:(Increase) / decrease
Sundry debtors
Loans and Advances
Current liability and provision
Cash generated from operation
Taxes paid
Net cash from operating activities

B] CASH FLOW FROM INVESTING

ACTIVITIES:Purchase of fixed assets and intangible
asset
Proceed from sale of fixed asset
Increase in investments in subsidiary
Sale of mutual fund of investment
Interest received
Dividend received from mutual funds
investment
Maturity on fixed deposit (bank)
Net cash from investing activity
C] CASH FLOW FROM FINANCING
ACTIVITIES:Repayment of term loan
Proceeds from issue of share capital
Share Issue expenses for preferential
allotment
Application Money received

(27,592,74
3)
1,0611,177,
395

(609,800,3
35)
(309,741,7
13)
253,412,06
0
395,047,40
7
(171,880,2
25)
223,167,18
2

54)
1,134,805,
874

325,977,34
0
(80,811,08
2)
(120,953,6
49)
1,259,018,
483
(160,517,5
78)
1,098,500,
905

(380.948,5
38)
2,602,541
(447,806,8
30)
271,625,70
1
20,700,549
33,940,152
38,655,263

(220,747,1
17)
465,354
(811,686,4
61)
(620,216,8
92)
48,161,951
10,462,448
159,105,61
4

(461,231,1

(1,434,455

Proceeds from working capital (loan)

Proceeds from short term loan
Increase in finance lease obligation
Dividend paid including corporate
dividend tax
Interest and finance charges
Net cash from financing activities
D] Exchange difference on translation
of currency cash
Net Increase in cash and cash
equivalents (A+B+C+D)
Cash at the close of the year
Cash at the beginning of the year
Add; Cash on account of amalgamation
Cash surplus:-

Note1:
Cash and cash equivalents include:
Cash in hand
Cheques in hand
Balance with scheduled banks:In current accounts
In deposit accounts
Balance with non-scheduled banks:In current account
Total:Add: Deposit with original maturity over
three months

62)

,103)

(225,504,8 (237,075,6
50)
48)
1,231,710,0 25,970,759
02
-(30,376,41
615,578
0)
202,817,60
1,994,184
2
134,968,06
-2
(2,255,367
39,364,500
)
5,967,513
(54,783,81
(64,327,61
7)
8)
(62,451,39
(41,088,13
9)
8)
(127,162,2
1,052,707,2
92)
45
(27,742,04
23,988,038
4)
838,631,30
3

(490,858,5
34)

1,480,830,0 527,300,50
81
4
527,300,50 1,018,159,
4
038
114,898,27
-5
(490,858,5
838,631,30 34)
3

Add: Deposit under lien

Cash and cash equivalents at the end of
the year

99,839
5,985,893

75,392
5,025,935

343,733,17 305,658,32
3
6
1,130,802,5 216,54,851
82
-208,595

527,300,50
1,480,830,0 4
81
38,655,263
-12,779,186
16,014,960
578,734,95
1,496,845,0 3
41

Note 2: The above cash flow statement has been prepared under
the indirect method as set out in Accounting Standard 3 on cash
flow statements.
Note 3: Previous years figures have been rearranged/regrouped
wherever necessary.

Statement of changes in working capital

For the year ended
31.03.2012
Particular

2011
Rs.

2012
Rs.

Changes in working capital

Increase

A. Current Asset:Long term loans and

advances
Other non-current asset
Trade receivables
Short term loans and
advances
Other Current asset
Decrease in Cash and
Cash equivalents

725,964,857
26,627,516
1,747,277,21
6
307,369,315
34,889,441

768,555,004
30,479,007
20,22,980,927
299,777,650
53,207,846

42,590,147
3,851,491
275,703,711
-18,318,405

--

Decrease

7,591,665

1,088,869,38
7

1,088,869,38
7
3,17,50,00,434

Total (A)

B. Current Liability:Other long term liability

Long term provision
Trade payables
Other current liability
Short term provision

3,93,09,97,732

3,500,000
37,850,628
443,187,211
581,164,397
169,727,456

2,153,300
69,404,686
543,158,994
618,633,574
167,007,702

1,40,03,58,256
TOTAL (B)

Working capital (A-B)

1,23,54,29,692
1,77,46,42,178
2,695,568,040

1,346,700
---2,719,754

31,554,058
99,971,783
37,469,177

Decrease In working
capital

92,09,25,862

92,09,25,862

2,695,568,040

1,26,54,56,07
0

2,695,568,04
0

1,26,54,56,07
0

CALCULATION OF FUNDS FROM OPERATION

AS ON 31ST MARCH 2012
PARTICUAR

AMOUNT

Net profit:-

TOTAL
AMOUNT
1,068,620,4
98

Add:- Non fund & non - operating items

(Debited in P & L a/c)
Depreciation/Amortisation/Diminutions
Expenses on employee stock option
scheme
Finance cost
Exchange difference on translation of
foreign currency

395,676,90
6
3,563,859
45,493,470
26,602,392
47,13,36,62
7

TOTAL (A)
Less:- Non fund & non operating items
(Credited in p & l a/c)
Profit on sale of fixed asset
Interest income
Dividend income
Unrealised foreign exchange (gain)
Profit on sale of business assets (Refer
note no.3)

1,53,99,57,1
25
625,495
18,411,441
34,397,776
32,807,649
100,451,23
3

Total (B)
18,66,93,59
4
Total (A) Total (b) =Funds generated
from operation:-

1,35,32,63,5
31

FUNDS FLOW SATEMENT

For the year ended 31st march 2012
SOURCES
Fund from operation
Proceeds from sale
of fixed asset
Sale of mutual funds
investment
Proceeds from sale
of business asset
(refer note 3)
Repaid by employee
welfare trust
Interest received
Dividend from
mutual fund
Proceeds from issue
of share
capital
and
application
money

AMOUNT

APPLICATION

1,353,263, Taxes paid

531
Purchase of fixed
asset
4,913,097 Investment in
subsidiary
111,920,6 Investment in joint
04
venture
Investment in share
64,985,00 of associate
0
Investment pref.
shares of subsidiary
3,000,000 Loan given to
30,141,90 subsidiary
1
Fixed deposit with
34,397,77 banks
6
Repayment of long
term loan other than

AMOUNT
223,070,4
41
523,165,2
55
1,359,611,
601
19,000,00
0
98,151,97
0
278,130,0
00
272,204,0
45
5,671,216

Proceeds loan from

working capital
Decrease in working
capital

65,006,74
8
657,220,1
76
920,925,8
62

banks
Repayment of long
term loan to banks
Repayment of short
term borrowings
Dividend paid
Interest and finance
charge
Exchange Loss
Reserve and surplus

3,24,57,74
,695

218,887,4
90
62,510,00
0
39,364,50
0
71,539,33
1
44,815,60
1
26,602,39
2
3,050,853

3,24,57,74
,695

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31ST MARCH 2012

PARTICULARS

MARCH

TOTAL

MARCH

TOTAL

31,2012
AMOUNT

AMOUNT

31,2011
AMOUNT

AMOUNT

A] Cash flows from operating

activities:Net profit
Adjustments for:(Profit amt.) / Loss amt.
(profit)/loss on sale of asset
Depreciation/amortisation/dim
inution
Expenses on employee stock
option
Finance cost
Interest income
Dividend income
Exchange differences on
translation of currency
Unrealised foreign
exchange(gain)/loss
Profit on sale of business
asset (refer note 3)

1,068,620,4
98
1,749,134
350,904,1
35
374,984
35,614,67
0
(31,208,13
0)
(33,940,15
2)

(625,495)
395,676,90
6
3,563,859
45,493,470
(18,411,44
1)
(34,397,77
6)
26,602,392
(32,807,64
9)
100,451,23
3

271,913,860
284,643,033

1,353,263,5
31

(23,988,03
8)
(27,592,74
3)

1,061,342,194

--

Operating profit before

working capital changes
Adjustment for changes in
working capital:Other long term liabilities
Long term provision
Trade payables
Other current liabilities(refer
note no.3)
Short term provision
Long term loan and advances
Other non-current asset
Trade receivables (refer note
no.3)
Short term loans and
advances
Other current assets
Cash generated from
operation

789,428,334

(1,346,700)
31,554,058
99,971,783
37,469,177
(2,719,754)
(42,590,14
7)
(3,851,491)
(275,703,7
11)
7,591,665
(18,318,40
5)

(167,943,52
5)
1,185,320,0
06
(3,050,853)
(223,070,44

3,500,000
(1,322,550
)
157,471,7
27
28,808,61
2
23,596,02
2
648,125
8,020,462
(608,241,1
15)

(572,959,530)
488,382,664
-(171,880,225)

316,502,439

1)
Reserve and employee
welfare fund
Taxes paid

959,198,712

(175,144,8
05)
(10,296,00
8)

Net cash from operating

activities
B] Cash flow from investing
activities
Purchase of fixed asset
Proceeds from sale of fixed
assets
Investments:In equity share of subsidiary
In equity share of joint
venture
In equity share of associate
In pref. share of subsidiary
Sale of mutual fund
investment
Proceeds from sale of
business asset (refer note
no.3)
Loan given to subsidiary
Repaid by employee welfare
trust intt.
Interest received
Dividend received from
mutual fund
Fixed deposit with bank

(523,163,2
55)
4,913,097
(1,359,611,
601)
(19,000,00
0)
(98,151,97
0)
(278,130,0
00)
111,920,60
4
64,985,000
(275,204,0
45)
3,000,000
30,141,901
34,397,776
(5,671,216)

(333,742,7
73)

(2,306,5775,
709)

-17,030,92
9
(156,840,1
89)
20,700,54
9
33,940,15
2
38,655,26
3

Net cash used in investing

activities
C] cash flow from financing
activity:Repayment of long term
loan(other than bank)
Repayment of long term
loan(bank)
Proceeds from issue of share

(218,887,4
90)
(62,510,00
0)
65,006,748
-657,220,17

2,602,541
(417,756,8
50)
(30,049,98
0)
--271,625,7
01

285,110,002

(26,602,392)

(553,834,657)

1,051,975,483

23,988,038

838,631,303

(225,504,8

1,480,830,082
527,300,504

capital and application money

Share issue expenses
Proceeds from working capital
loan
Repayment of short term
borrowings
Dividend paid including
corporate dividend tax
Interest and finance charges

6
(39,364,50
0)
(71,539,33
1)
(44,815,60
1)

(1,088,869,3
87)

391,960,695
1,480,830,0
82
-(1,088,869,3
87)

Net cash from financing

activities

50)
--

838,631,303
1,233,704,
186
(30,376,41
0)
134,968,0
62
39,364,50
0
(64,207,62
1)
(35,972,38
4)

D] Exchange differences on
translation of foreign currency
cash

Cash surplus/(deficit) for the

year
Note1:
Cash include:
Cash in hand
Cheques in hand
Balance with banks:In current account
In deposit account
In unpaid dividend account
Total:Add: deposit with original
maturity over three month

1,480,830,082
-1,480,830,082

Net increase/(decrease) in
cash(A+B+C+D)

Cash at the end of the

year(refer note 1)
Cash at beginning of the
year(refer note1)
Add: cash on account of
amalgamation

114,898,275

391,96,695
5,671,216
67,130
9,674,511

397,631,911

380,622,56
7
-1,596,487

99,839
5,985,893
342,444,1
04
-1,497,664

Cash at the end of the year as

per schedule VI

Note 2:
Figures in bracket represent outflows of cash.
Note 3:
Adjustment made in cash flow for sale of business assets to
sankalp semiconductor pvt. Ltd. For a consideration other than
cash:
Adjustment made to:
Increase/ (decrease) in other current liabilities
5,000,000
(Increase)/decrease in trade receivables
77,088,137
Purchase of long term investments in equity instrument of other
entities
(117,554,370)
Profit on sale business asset
35,466,233
000000
Note 4:
The above cash flow statement has been prepared under the
indirect method as set out in accounting standard 3 on cash flow
statement.

Statement of changes in working capital

For the year ended
31.03.2013

Particular

2012
Rs.

2013
Rs.

Changes in working capital

Increase

Decrease

862,109,026
29,417,550
2,225,092,714
422,435,969
101,135,297

10,003,545
279,199,924
50,437,513
47,927,451

-1,094,800
----

270,719,998

270,719,998

--

2,153,300
---3,004,806

41,808,630
90,553,843
43,289,980

A. Current Asset:Long term loans and

advances
Other non-current asset
Trade receivables
Short term loans and
advances
Other Current asset
increase in Cash and
Cash equivalents

852,105,481
30,512,350
1,945,892,79
0
371,998,456
53,207,846
--

3,91,09,10,554

Total (A)

3,25,37,16,923

B. Current Liability:--

Other long term liability

Long term provision
Trade payables
Other current liability
Short term provision

21,53,300
6,94,04,68
6
54,31,58,9
94
59,56,96,0
36
26,44,03,26
0

1,64,53,10,623
2,26,55,99,931

TOTAL (B)
Working capital (A-B)

11,12,13,316
63,37,12,837
63,89,86,016
26,13,98,454

1,47,48,16,276
48,66,99,284

1,77,89,00,647

Increase In working
capital

2,26,55,99,931
48,66,99,284
2,26,55,99,931

66,34,46,537

66,34,46,537

CALCULATION OF FUNDS FROM OPERATION

AS ON 31ST MARCH 2013
PARTICUAR
Net profit:-

AMOUNT

TOTAL AMOUNT
1,342,906,201

Add:- Non fund & non operating items

(Debited in P & L a/c)
Loss on sale of fixed asset
Depreciation/Amortisation/Di
minutions
Expenses on employee stock
option scheme
Finance cost
Provision for diminution in
value of investment

226,433
375,139,565
-82,123,086
98,151,970

55,56,41,054

1,89,85,47,255

TOTAL (A)
Less:- Non fund & non
operating items
(Credited in p & l a/c)
Interest income
Dividend income
Exchange difference on
translation of foreign
currency
Unrealised foreign exchange
(gain)
Profit on sale of business
assets (Refer note no.3)

(23,179,410)
(54,263,116)
(10,313,859)
(2,913,168)
(79,670,113)

(17,03,39,666)

1,72,82,07,589

Total (B)

Total (A) Total (b) =Funds

generated from operation:-

FUNDS FLOW SATEMENT

For the year ended 31st march 2013
SOURCES

AMOUNT

APPLICATION

AMOUNT

Funds from
operation

1,728,207 Increase in working

,589
capital

486,699,2
84

Sale of fixed asset

Proceeds from sale
of business asset
(refer no.3)
Loan repaid by
subsidiary
Interest received
Dividend from
mutual fund
Loan from bank
Loan from other than
bank
Issue of share capital
Proceeds from
working capital loan

1,931,794 Taxes paid

Purchase of fixed
79,670,11 asset
3
Investment in
88,341,21 subsidiary
6
Investment in joint
23,531,46 venture
6
Purchase of mutual
54,263,11 fund
6
Loan given to
1,090,078 employee welfare
,750
trust
106,746,0 Fixed deposit
88
Repayment of bank
1,705,503 loan
,573
Repayment of other
than bank
212,022,8 Issue expenses
16
preferential
allotment

348,325,9
15
475,422,1
77
1,749,709
,780
50,000,00
0
1,671,738
,475

Exchange gain

8,004,078
23,959,10
7
500,295
31,114,76
6
43,741,84

10,313,85 Dividend paid

9
Interest and finance
charge

5,100,610
,380

1
144,825,6
28
66,569,03
4

5,100,610
,380

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31ST MARCH 2013
PARTICULARS

MARCH
31,2013
AMOUNT

TOTAL
AMOUNT

MARCH
31,2012
AMOUNT

TOTAL
AMOUNT

A] Cash flows from operating

activities:1,342,906,
201

Net profit
Adjustments for:(Profit amt.) / Loss amt.

226,433

1,068,620,4
98

(625,495)

(profit)/loss on sale of asset

Depreciation/amortisation/di
minution
Expenses on employee stock
option
Finance cost
Interest income
Dividend income
Provision for diminution in
value of investment
Exchange differences on
translation of currency
Unrealised foreign
exchange(gain)/loss
Profit on sale of business
asset (refer note 3)

375,139,56
5
--

395,676,906
3,563,859
45,493,470
(18,411,441
)
(34,397,776
)

82,123,086
(23,179,41
0)
(54,263,11
6)

-98,151,970
(10,313,85
9)
(2,913,168)
(79,670,11
3)

385,301,38
8
1,728,207,
589

26,602,392
(32,807,649
)

284,643,03
3

100,451,233
1,353,263,5
31

Operating profit before

working capital changes
Adjustment for changes in
working capital:Other long term liabilities
Long term provision
Trade payables
Other current liabilities(refer
note no.3)
Short term provision
Long term loan and
advances
Other non-current asset
Trade receivables (refer note
no.3)
Short term loans and
advances
Other current assets
Cash generated from
operation
Reserve and employee
welfare fund
Taxes paid

(2,153,300)
41,808,630
90,553,843
43,289,980
(3,004,806)
(10,003,54
5)
1,094,800
(279,199,9
24)
(50,437,51
3)
(47,927,45
1)

(215,979,2
86)
1,512,228,
303
--(348,325,9
15)

1,163,902,
388

(1,346,700)
31,554,058
99,971,783
37,469,177
(2,719,754)
(42,590,147
)
(3,851,491)
(275,703,71
1)
7,591,665
(18,318,405
)

(167,943,52
5)
1,185,320,0
06
(3,050,853)
(223,070,44
1)

959,198,71
2

(523,163,25
5)

Net cash from operating

activities
B] Cash flow from investing
activities
Purchase of fixed asset
Proceeds from sale of fixed
assets
Investments:In equity share of subsidiary
In equity share of joint
venture
In equity share of associate
In pref. share of subsidiary
Sale of mutual fund
investment
Proceeds from sale of
business asset (refer note
no.3)
Loan (given to)/repaid
subsidiary
Loan (given to) Repaid by
employee welfare trust intt.
Interest received
Dividend received from
mutual fund
Fixed deposit with bank
Net cash used in investing
activities
C] cash flow from financing
activity:Proceeds from loan from
bank
Repayment of long term
loan(bank)
Proceeds from loan from
other than bank
Repayment of long term
loan(other than bank)

(475,422,1
77)

4,913,097
(1,359,611,
601)
(19,000,000
)
(98,151,970
)
(278,130,00
0)
111,920,604

1,931,794
(1,749,709,
780)
(50,000,00
0)
--(1,671,738,
475)
79,670,113
88,341,216

64,985,000
(275,204,04
5)
(3,731,095,
912)

(8,004,078)
23,531,466
54,263,116
(23,959,10
7)

-(62,510,000
)

1,090,078,
750
(500,295)

-(218,887,49
0)

106,746,08
8
(31,114,76
6)
1,705,503,
573
(43,741,84
1)

3,000,000
30,141,901
34,397,776
(5,671,216)

(2,306,5775
,709)

2,827,599,
663

65,006,748
285,110,00
-657,220,176 2
(39,364,500
)
(71,539,331

Proceeds from issue of share

capital and application
money
Share issue expenses
Proceeds from working
capital loan
Repayment of short term
borrowings
Dividend paid including
corporate dividend tax
Interest and finance charges

212022,81
6
-(144,825,6
28)
(66,569,03
4)

10,313,859
270,719,99
8

)
(44,815,601
)

(1,088,869,
387)

662,680,69
3

391,960,69
5

391,960,69
5

1,480,830,0
82

270,719,99
8

Net cash from financing

activities

(26,602,392
)

(1,088,869,
387)

D] Exchange differences on
translation of foreign
currency cash
Net increase/(decrease) in
cash(A+B+C+D)

Cash at the end of the

year(refer note1)
Cash at beginning of the
year(refer note1)
Cash surplus/(deficit) for the
year
Note1:
Cash include:
Cash in hand
Cheques in hand
Balance with banks:In current account
In deposit account
In unpaid dividend account
Total:-

662,680,69
3
51,949
6,943,564
351,206,59
9
302,640,31
0
1,838,271

27,147,215
689,827,90
8

67,130
9,674,511
380,622,567 391,96,695
-5,671,216
1,596,487
397,631,91
1

Add: deposit with original

maturity over three month
Cash at the end of the year
as per schedule VI

Note 2:Figures in brackets represent outflows of cash and cash

equivalents

Note 3:Adjustment made in cash flow for sale of business assets to

sankalp semiconductor pvt. Ltd. for a consideration other than
cash:-

Particulars
Adjustments made to:
Increase/(decrease) in other current
liabilities
(increase)/ decrease in trade receivables
Purchase of long-term investments in
equity instruments of other entities
Profit on sale of business assets

31st march
2013
Amount

31st march
2012
Amount

---

5,000,000
77,088,13
7

----

(117,554,3
70)
35,466,23
3

--

Note 4:
The above cash flow statement has been prepared under the
indirect method as set out in Accounting Standard 3 on cash flow
statements.

ANALYSIS & INTERPRETATION:For the year of 2010-11:-

The statement of Changes in working Capital prepared for

year 2010-11 disclose that, there is increase in working capital by
Rs.1,504,761,291, where as funds flow statements reveals that,
funds generated from operation during the year largely used for
investing activities of company.

In year 2010-11, there is increase in working capital,

which shows there is increase in current asset and decrease in
current liabilities from previous year which is beneficial for the
company. In this year Fund from operation is Rs. 1,061,177,395
which is the profit of the company and fund from operation is less
than working capital of company.
Cash flow statement prepared for the year 2010-11 disclose
that, cash inflow in course operating activities is Rs. 223,167,182
it include taxes paid by the company, increase or decrease in
working capital and operating profit before changes in working
capital. Cash from operating activities is decreases largely by
previous year because the working capital is increases. Cash
outflow from investing activities is Rs.461,231,162 is also
decreases as per last year because company investing activities
are decreases as compare last year therefore the capital used in
investing activities is less in the year 2011 than 2010. Cash flows
from financing activities is Rs.1052,707,245 from financing
activities company attract the owner (shareholder of company)of
company, because company issued of share capital for
Rs.1,231,710,002 in this year if we compare that so in last year
company issued share capital are Rs.25,970,759, share capital
largely increasing by the company in this year. Finally in the year
2011 the net cash & cash equivalents from cash flow is Rs.838,
631,303 its increases by last year. Because we know that revenue
increases cash equivalents increases.

For the year of 2011-12:The statement of changes of working capital prepared for year
2011-12 disclose that, there is decrease in working capital by Rs.
920,925,862, whereas funds flow statement reveals that, funds

generated from operation during the year were largely used in

investing activities of the company like in purchase of fixed asset,
investment in equity shares of subsidiary and decreasing liabilities
by the repayment of loans but investing activities more than the
repayment. Thats all things are directly impact on the working
capital thats why the current asset decreases and liability
increases.
In the year 2011-12, there is decrease in working
capital, which shows there is increase in liability and decrease in
asset. In this year Funds from operation is Rs.1, 353,263,531
which is profit of the company. Company concentrate in this year
on investing and financing activities like purchase of fixed asset
and repayment of loans.
Cash flow statement prepared for year 2011-12 disclose
that, cash inflow in course of operating activities are
Rs.959,198,712 it include taxes paid by the company, increase or
decrease in working capital and operating profit before changes in
working capital. Cash from operating activities is increases largely
by previous year because the working capital is decreases. Cash
outflow from investing activities is Rs.2,306,575,709 is largely
increases as per last year because company investing activities
are increases as compare last year therefore the capital used in
investing activities is large in the year 2012 than 2011 its directly
affect to working capital. Cash flows from financing activities is
Rs.285,110,002 from financing activities company attract the
owner (shareholder of company)of company, because company
issued of share capital and application money for Rs. 65,006,748
in this year if we compare that so in last year company issued
share capital are Rs.1,233,704,186 share capital increasing by the
company in this year. By the financial activities company was
concentrate on repayment to the creditors of the company
because the company repaid the loan of the bank & other than

banks. Finally in the year 2011 the net cash & cash equivalents
from cash flow is Rs.1, 088,869,387 its increases by last year.
Because we know that revenue increases cash equivalents
increases. It includes at the beginning of the year cash and
equivalents 1,480,830,082 and at the close of the year is Rs.391,
960,695.

For the year of 2012-13:The statement of changes of working capital

prepared for year 2012-13 disclose that, there is increase in
working capital by Rs. 486,699,284, whereas funds flow statement
reveals that, funds generated from operation during the year were
largely used in investing activities of the company like in purchase
of fixed asset, investment in equity shares of subsidiary, purchase
of mutual fund and investment in equity shares of joint venture
and proceed the capital from various sources like loan from bank
and other than bank and decreasing liabilities by the repayment of
loans but investing activities are more than the repayment of loan.
Thats all things are affected on working capital by the policies of
the company and working capital rises because the capital
increases from financing activities.
In the year 2012-13, there is increase in working
capital, which shows there is increase in asset and decrease in
liability. In this year Funds from operation is Rs.1, 728,207,589
which is profit of the company. Company concentrate in this year
on investing and financing activities like purchase of fixed asset
and repayment of loans and policies of the company are increases
in capital by the loan.
Cash flow statement prepared for year 2011-12 disclose
that, cash inflow in course of operating activities are
Rs.1,163,902,388 it include taxes paid of Rs. 348,325,915 by the
company, changes in working capital and operating profit before
changes in working capital. Cash from operating activities is
increases largely by previous year because the sale of business
asset and dividend income and net profit also rises from last year
thats why cash from operating activities are rises. Cash outflow
from investing activities is Rs.3,731,095,912 is largely increases

as per last year because company investing activities are

increases as compare last year therefore the capital used in
investing activities is large in the year 2013 than 2012 because
company investing activities involve purchase of fixed asset and
investments in subsidiaries, joint venture and mutual fund. Cash
flows from financing activities is Rs.2, 827,599,663. From
financing Activities Company attract the owners (shareholder of
company) of the company, because company issued of share
capital and application money for Rs. 1,705,503,573 in this year if
we compare with previous year company proceeds from share
capital are Rs. 65,006,748 share capital largely increasing by the
company in this year. By the financial activities company was
concentrate on proceeds cash from the way of loan from bank or
other than bank. Repayment to the creditors of the company is
also including in financing activities because the company repaid
the loan of the bank & other than banks. Finally in the year 2011
the net cash & cash equivalents from cash flow is Rs.270, 719,998
its decreases by last year, because the company used capital for
investing and financing activities. We know that if revenue
increases and decrease in expenses its increasing cash
equivalents. It includes at the beginning of the year cash and
equivalents Rs.391, 960,695 and at the close of the year is Rs.662,
680,693.

CHAPTER VI
FINDINGS AND SUGGESTIONS

Observation & findings:1.Company has continuously raised additional capital

from last three years which is helping company to
expand business.
2.In the year 2010-2011, company had raised high
working capital which utilize large amount of funds
and long term investment.
3.It is observed that, in the year 2012-2013 company
raised its funds mostly by means of loans, which leads
increased burden of interest and in the year 2010-11,
2011-12 company raised funds by issued share capital
1,231,710,002 and 65,006,748 respectively for the
business.
4.The percentage of interest received is substantially
lower than payment of interest and finance charge.
5.Reserve and surplus is also increasing showing some
profit to company.
6.It is observed that, more than 40% of total funds
generated from operating activities were utilized for
purchase of fixed assets & the remaining funds were
used for payment of direct tax, interest & finance
charges.
7.Cash outflow from investing activities is increased
largely in the year 2011- 12 by previous year which

indicates company isnt in sound position in particular

year, and continue in the year 2012-13.
8.Cash flow arising from financing activities is
increasing, but as a result companys Interest and
finance charge also rising.
9.In the year 2011-12 cash and cash equivalents are
deficit largely by the previous year which is some time
harmful for the company.
10.
Translation of foreign currency is negotiate on the
basis of rupees value, translation of currency is
depending on value of rupees therefore foreign
currency translation is expenses or profit its depend on
the value of rupees. Thats why in the year 2010-11
and 2012-13 company faces expenses on the
translation of foreign currency. In the year2011-12
company get a profit on the translation of foreign
currency.
Suggestions:1.Company should pay attention to interest paid to
banks for the high amount of loans raised.
2.Company should issue preference shares also which
will help to maintain an optimum & properly leveraged
capital structure.
3.It is suggested that company should raise its funds
through internal sources through retention of earnings
& ploughing back of profits. As per statements
company uses internal sources but its not sufficient.
4.Company should raise funds from operating activities
and decrease loans.

5.Company should adopt a stable & optimum dividend

policy as compared to its funds generated.
6.It is suggested that company should pay attention
towards cash inflow in course of operating activities,
because it is declining year by year.
7.Company should try to reduce its interest and finance
charges.

CHAPTER-VII
CONCLUSION

Conclusion
It can be concluded that Kpit cummins infosystem ltd.

CHAPTER VIII
BIBLOGRAPHY

BIBLOGRAPHY

Books:
S.N. MAHESHWARI (FINANCIAL MANAGEMENT)
FINANCIAL MANAGEMENT (BY PRASANNA CHANDRA)
FINANCIAL MANAGEMENT BY KHAN AND JAIN
ANNUAL REPORTS

Web Resources:www.kpitcummins.com
www.caindia.com
www.ibef.org.com