SUMMER TRAINING REPORT

ON

CASH FLOW ANALYSIS

OF

NORTH BIHAR POWER DISTRIBUTION COMPANY LTD.

SUBMITTED TO

MANAGEMENT PROGRAMME

DEPARTMENT OF APPLIED ECONOMICS AND COMMERCE

PATNA UNIVERSITY, PATNA

(In the partial fulfillment of the degree of MBA)

Under the supervision Submitted by:

And guidance of: - DR. N. K. JHA Name : ANURAG KUMAR

Session: 2016-2018 Class Roll No: 52

Name of course: MBA

 DECLARATION

I hereby declare that the Project report titled CASH FLOW

ANALYSIS OF NORTH BIHAR POWER DISTRIBUTON
COMPANY LTD. Is my original work and has not been
published or submitted for any degree, diploma or other similar
titles elsewhere. This has been undertaken for the purpose of
partial fulfillment of MBA at POST GRADUATE COLLEGE OF
PATNA UNIVERSITY.

Signature of the candidate

(Anurag Kumar)
 ACKNOWLEDGEMENT

I express great pleasure in introducing my project report On CASH FLOW

ANALYSIS at North Bihar Power Distribution Company Ltd.
A considerable amount of hard work, thinking, analysis and informational inputs
from various sources are involved in preparing this project report.
I express my sincere and heartfelt gratitude to Mr. Alok Kumar(DGM Accounts)
and Mr. Prabhat Kumar (Chief account officer) for providing me with an enviable
opportunity to execute this project in their esteemed organization and for patiently
mentoring and guiding me throughout the project.
This project wouldnt have been successful without the precious guidance and
untiring inspiration of Mr Prabhat Kumar (Chief Accounts Officer), (NBPDCL), in
spite of his very busy schedule; he made sure in every way that I acquire the best
possible exposure and knowledge during my project days.
Moreover, I would also like to thank all the employees of NBPDCL (Accounts
Deptt.) for their constant support and help.
I would also like to thank Dr. N.K. Jha (Deen PU) for the coordination and support
in completion of this project and all my friends and many other who have helped
me during the completion of my project. Without their valuable support this project
will not be possible.
Being a religious person I thank the almighty God for making me able to do such
type of creative project work.

Anurag Kumar
 PREFACE

About The Project

This project is totally based on Cash Flow Analysis of North Bihar Power
distribution Company Ltd. at Patna.
Cash Flow Analysis is an important technique of the financial analysis where
financial statements are critically examined for the purpose of knowing the
availability of cash with the firm during any particular period. This technique helps
in ensuring the liquidity position of any business firm. So with the help of this
technique any business firm
The organization uses various techniques to trace out the performance of employees
to utilize the best effort of an employee. They even conduct survey with customer
know over it. This report is also based on the internship experience, through the
working environment.

The Approach
To give a comprehensive coverage to the subject of this project, the project work is
done with the influence of proper thesis of the cash flow analysis and
implementation of various types of techniques and tools. Each part of this project
deals with different type of work related to the main project.
 EXECUTIVE SUMMARY
The main objective of this project is to check the
BRIEF CONTENTS
Preface

PART 1: ORGANIZATION PROFILE

1.1) ORIGIN OF NBPDCL

1.2) DUTIES OF BSPHCL

1.3) DUTIES OF BSPTCL

1.4) DUTIES OF BSPGCL

1.5) DUTIES OF SBPDCL

1.6 DUTIES OF NBPDCL

PART 2: INTRODUCTION TO CASH FLOW ANALYSIS

2.1) BRIEF OVERVIEW

2.2) METHODOLOGY USED

2.3) PROCESS OF EVALUATION

PART 3: ANALYSIS AND DATA IMPLEMENTAION

3.1)

3.2)

3.3)

PART 4: CONCLUSION AND EVALUATION

4.1)

4.2)

4.3)
BRIEF HISTORY OF ERSTWHILE BIHAR STATE ELECTRICITY BOARD
NOW BSPHCL
2.1 ORIGIN OF ERSTWHILE BSEB
The pre-independence period was faced by shortage of industrial,
agricultural and economic development in the country. Electricity was one of
the most important factors of all-round development in agricultural,
industrial and commercial sectors. As pre-independence era did not rove
adequate contribution for generation and distribution of electrical energy,
the Government of India took a policy decision to empower it functional
autonomy and commercial viability.

As too much Government control proved to be barring for nipped decision

making and consequent development, the State Electricity Board was to be
established on quasi Government basis. So, Government of India passed a bill
named the Electricity Supply Act, 1948 to frame law governing equitable
distribution of electricity for agricultural as well as industrial development.

This bill provided an opportunity to various State Governments to make laws

for rapid development of generation and distribution of electricity in their
respective states. As a result, the Government of Bihar Electricity Board of
Patna came into effect from 1st April, 1949. Thus, the Bihar State Electricity is
a statutory organization. Under Section18 of Electricity Supply Act of 1948
targeted Bihar State Electricity Board with the general duty of promoting
coordinate development of generation and distribution of electricity within
the state in most efficient and economic manner.
ORIGIN OF NDPDCL
Pursuance to the provisions of Electricity Act 2003, for re organization of Bihar
State Electricity Board, following five companies have been incorporated under the
Companies Act, 1956 vide State Govt. resolution no. 999 dated 06.03.2012: -

1. North Bihar Power Distribution Company Ltd., Patna Distribution Company for
North Bihar

2. Bihar State Power (Holding) Company Ltd., Patna A controlling company which
will hold equity capital of the other four subsidiary companies and will act as a
controlling company for the subsidiary companies.

3. Bihar State Power Transmission Company Ltd., Patna Transmission Company

4. Bihar State Power Generation Company Ltd., Patna Generation Company

5. South Bihar Power Distribution Company Ltd., Patna Distribution Company for
South Bihar.
 2.2 DUTIES OF BSPHCL

The duties of the Company have been defined in Section 18 of the Electricity Supply Act,
1948. It has been charged with the responsibility of promoting a coordinated
development of generation, supply and distribution of electricity in the State of Bihar on
an efficient and economic basis of management.
Though BSPHCL deals in only one product, i.e., electrical power, its significance and
utility value is enormous for the State. Almost all aspects of modern life-style are
dependent on it in one way or another.

2.3 DUTIES OF BSPTCL

The duties of Bihar State Power Transmission Company Limited are to build, maintain
and operate an efficient, coordinated and economical inter-State transmission system or intra-
State transmission and to comply with the directions of the Regional Load Dispatch Centre and
the State Load Dispatch Centre.

2.4 DUTIES OF BSPGCL

Bihar State Power Generation Company Limited means the generating company which
possesses the Generating Undertaking of the Board.

2.5 DUTIES OF SBPDCL

South Bihar Power Distribution Company Ltd (SBPDCL) has been given the status of a
Distribution Licensee as per Section 14 of the Electricity Supply Act 2003 and engaged
primarily in the business of distribution of Electricity.

2.6 DUTIES OF NBPDCL

The Company has been given the status of a Distribution licensee as per Section14 of the
Electricity Act 2003. The Company is engaged primarily in the business of distribution of
electricity. It has been vested with the distribution assets, interest in property, rights and
liabilities of the erstwhile BSEB necessary for the business of distribution in its area of
distribution comprising of all 21 districts of North Bihar.

ADMINISTRATIVE SET-UP OF BSPHCL &ITS SUBSIDIARY

BSPHCL:

In order to ensure that its responsibilities are discharged effectively and efficiently, the
Company has engaged nearly 1,700 officer and 14,850 staffs on various posts to generate its
own power and to maintain proper distribution system. It arranges to supply the electricity
properly to the consumers and maintain their equipment.

As on today, the installed generating capacity of BSPHCL in terms of its Thermal and Hydro-
Electrical plants exceeds 559.2 MW.

The Company has its full-fledged Accounts and Audit Department for proper keep-up of its
financial transaction as also to ensure efficient financial management on the commercial line.

The Company has also its personnel wing to safeguard the interest of all its employees. The bio-
data and service records of the employee have been computerized at its Headquarters.
ADMINISTRATIVE SET-UP

BIHAR STATE POWER (HOLDING) COMPANY LIMITED

BSPTCL:

BSPTCL operates a transmission network of 6182 Kms. of 132 K.V. Lines & 1663 Kms. of 220
K.V. lines & 75 Kms. of 400 K.V. Line as well as 97 Nos. of operational EHV sub- stations
with 7360 MVA Transformation Capacity.

Besides continual technical up-gradation, the company lays emphasis on imbibing required
skills in its people and therefore it has invested in creating training infrastructure. It has recently
established a "Power Training Centre" at Gaurichak, Patna where Employees/Students are
trained on various power system protection and equipment testing.

The day-to-day affairs of the company are managed by the Managing Director assisted by
Director (Project) and by whole time Chief-Engineers both at HQ and field levels. They are in
turn assisted by a team of dedicated and experienced professionals/Engineers in various fields.
BIHAR STATE POWER TRANSMISSION COMPANY LIMITED

Managing
Director

Board of
Directors

Director Energy Secretary

Director Director Director Energy Dept.,
Finance and
Administration Transmission Generation Bihar
Revenue

BSPGCL:

Power Generation in Bihar is primarily fossil fuel based. The state has several plans for power
generation through Bihar State Power Generating Company.

Bihar grid, as on date, is totally dependent on central supply. Earlier Katihar, Pirpainti and
Nabinagar were identified for installation of coal based Power Projects in the State of Bihar.
Subsequently, a Special Purpose Vehicle (SPV) in the name of Bihar Power Infrastructure
Company Pvt. Ltd. has been incorporated to carry out the development activities and further
carry out bid process management. Bihar state is also trying for a nuclear power station.

Power system in Bihar is predominant by thermal power generation and the contribution of
hydro power is only 10%. Bihar has only 491.1 MW of installed capacity, of which 440 MW is
thermal and remaining 51.1 MW is hydel.

Separation of Jharkhand from Bihar left the erstwhile Board with only three Power Generation
Plants. Details of which are as follows:

(a) Barauni Thermal Power Station, Barauni (BTPS)

(b) Muzaffarpur Thermal Power Station (MTPS)

(c) Koshi Hydel Power Station (KHPS)

BIHAR STATE POWER GENERATION COMPANY LIMITED

Managing
Director

Board of
Directors

Director Energy Secretary

Director Director Director Energy Dept.,
Finance and
Administration Transmission Generation Bihar
Revenue

SBPDCL:

South Bihar Power Distribution Company Ltd (SBPDCL) has been given the status of a
Distribution Licensee as per Section 14 of the Electricity Act 2003 and engaged primarily in the
business of distribution of Electricity and is serving more than 18 lacs consumers in 17 districts
of South Bihar.

Presently, we are providing uninterrupted power supply in PESU, Area, Patna i.e. Capital of
Bihar and also providing 18-20 Hrs assured power supply in the entire17 district HQ of South
Bihar. It also gives their consumers the assurance for replacement of defective transformer in
the urban areas in 24 hrs & in rural areas in 72 hrs.
 ADMINISTRATIVE SET-UP

SOUTH BIHAR POWER DISTRIBUTION COMPANY LIMITED

NBPDCL:

NBPDCL is a company registered under the provisions of Companies Act 1956 and is a fully
owned subsidiary Company of BSPHCL.

NBPDCL provides power in 21 districts of North Bihar namely, 1. West Champaran, 2. East
Champaran, 3. Sitamadhi, 4. Sheohar, 5. Muzaffarpur, 6. Vaishali, 7. Saran, 8. Siwan, 9.
Gopalgunj, 10. Mahubani, 11. Darbhanaga, 12. Samastipur, 13. Begusarai, 14. Khagaria, 15.
Saharsa, 16. Supaul, 17. Medhepura, 18. Araria, 19. Katihar, 20. Purnea and 21. Kishangunj.
ADMINISTRATIVE SET-UP

NORTH BIHAR POWER DISTRIBUTION COMPANY LIMITED

ORGANISATION PERCEPTION OF THE ENVIRONMENT

The chapter Organization Perception of the Environment contains the survey report of the
employee satisfaction level. It was found that most of the workers were while working with the
organization. They were extremely satisfied regarding the working environment and inter-
departmental communication.
CASH FLOW STATEMENT
Cash is one of the most important components of the company finances. Every company
understands the provisions of Accounting Standard 3 (AS-3) to ensure that they prepare
correct cash flow statement for the analysis of higher management.

Meaning

Cash flow statement is a statement of changes in the short term financial position of the
business due to inflow and outflow of cash. Statement of cash flow is required for short range
financial planning. In other words, cash flow statements are the summarized form of inflow of
cash funds from different sources and the uses to which the cash funds have been applied.
Cash flow statements are useful for the management in accessing the capability of business to
meet its short term commitments towards creditors for goods and expenses.

Cash flow statement prepared month wise presents information regarding cash available
every month. From this statement we can identify in which cash is generally surplus or short.
Cash flow statement, in this way will enable the management to revise its short term financial
plans.

The revised AS-3 excludes movement between items that constitute cash and cash equivalents
as they are apart from the cash management of the enterprise and do not relate to operating,
investing and financing activities. Example of these transaction are as follows:

(i) Cash withdrawn from bank for business.

(ii) Cash deposited into bank
(iii) Purchase and sale of marketable securities.
Definition of Cash
Cash means cash is hand and demand deposits with the bank.

Cash Funds - As per Accounting Revised Standard-3 (AS-3) issued by the council of ICAI Cash
funds include:

(i) Cash is hand

(ii) Demand deposits with banks and
(iii) Cash equivalents.

From the above, it may be noted that cash funds is a broad term which include cash
equivalents apart from the actual cash in hand.

Cash equivalent means short term highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of changes in
value. Investments with shirt term maturity period of, say three months or less from the
date of acquisition qualify as a cash equivalent.

Cash equivalents consist of:

a) Bank overdraft
b) Cash credit
c) Short term deposits
d) Marketable securities

Thus, cash flow statement deals with flow of cash funds which include cash equivalent as
well as actual cash.

### Cash Flow Statement is additional information to users of financial statement. The
statement exhibits the incoming and outgoing of cash. The statement assesses the
capability of the enterprise to generate cash and utilize it. Cash flow statement is
undoubtedly a tool for assessing the liquidity and solvency of the enterprise.
Uses/Need/Benefits/Advantages of cash flow statement
Cash flow statement has got the following uses:

1. Tool of Planning: Cash Flow statement is used as the basis for the projection of future
investing and financing plans of the enterprise by the management. Payment of long term
loans, expansion and modernization of the plant and payment of interest and dividend can
be planned on the basis of the information supplied by Cash flow statement.

2. Efficient cash management: The management knows the cash status, its shortage,
adequacy and sufficiency and makes use of the cash effectively. In case of shortage of cash,
requisite cash is arranged. If there is surplus cash, it is properly invested.

3. Knowledge of magnitude and direction of cash flow: The cash Flow Statement provides
us information regarding cash generated and used in operating, investment and financial
activities. On the basis of information supplied financial structure of the enterprise can be
evaluated.

4. Tools of historical analysis: The financial decisions taken in the past can be evaluated on
the basis of information supplied b Cash flow Statement. Certain interesting information,
such as shortage of cash even though there was sufficient profit or surplus cash. When
there was substantial loss, what happened to the huge cash received from the sale of land
etc. are available from Cash Flow Statement.

5. Presenting separate financial activities: Cash flow Statement based on AS-3 presents
separately cash generation and used in operating, investing and financial activities.
 Limitations of Cash Flow Statement
In spite of its various advantages Cash flow statement has got the following limitations:

1. Ignoring non-cash transactions: Cash flow statement takes into

consideration cash transactions only. Non-cash items, where flow of
cash is not involved are ignored. Important items like conversion of
debentures into shares of new debentures, issue of shares against
purchase of fixed assets etc. are ignored.
2. Based on secondary data: Cash Flow statement is based on the data
supplied by financial statement i.e. Income Statement and Position
Statement. It has to rely and base itself on secondary data. It has none
of its primary data. As such mistakes and deficiency of the financial
statements is passed on to the Cash Flow Statement also.
3. Historical Concept: The Cash Flow Statement is based on what has
happened, recorded and reported by financial statements. Projection of
future on the basis is not very safe and reliable.

Difference between Cash flow Statement and Cash Budget

Cash flow Statement and cash budget are prepared to identify the inflow and outflow of cash
over a period of time. The only difference between the two is that cash flow statement is
prepared for the past period and cash budget is prepared for the future period. Cash budget
indicates the requirement of cash to meet future expenses. On the other hand cash flow
statement shows the past trend of inflow and outflow of cash.
Method Used
Cash flow analysis
Cash flow analysis is a very important technique of the financial analysis where financial
statements are critically examined for the purpose of knowing the availability of cash with the
firm during the particular period.

This technique helps in insuring the liquidity position of any firm. With the help of this
technique every business firm is in a position to maintain the liquidity position or to improve
adjusting the liquidity position at the desired level.

Under this technique we go to prepare two important methods.

(1). Traditional Method

(2). Modern Method

As per the latest changes in the accounting principles, preparation of cash flow statement has
become mandatory whose turnover is more than 50 Crore and such business firm is bound to
prepare cash flow statement as per accounting standard III. However other business firms
have the option to prepare the cash flow statement either under the traditional method or as
for accounting standard III which is known as modern method. Most of the business firms have
started preparing cash flow statement as per accounting standard III hence we shall discuss
the preparation of cash flow according to modern method which is done by preparing four
statements.

1. Statement showing cash from operating activities.

2. Statement showing cash from financial activities.
3. Statement showing cash from investment activities.
4. Cash Flow Statement.
 1. Calculation of cash from operating activities
This Statement is prepared for knowing the cash operating profit available with the firm which
is prepared in the same manner as we prepare statement showing fund from operation under
fund flow analysis. But there is one point of difference that changes in current assets and
current liabilities are not recorded in calculating fund from operation but these changes are
recorded in cash from operation.

According to Accounting Standard-3 (AS-3) issued by the institute of Chartered Accountants of

India, there are two methods for determining cash flow from operating activities are as
follows:

1. Direct Method
2. Indirect method

1. Direct Method: In this method gross receipts and gross payments of cash are disclosed. Only
cash transactions are taken into consideration which are related to the concerned business.
When we follow direct method for calculating cash from operating activities it is the difference
between the cash operating income and Cash operating expenses.

When we follow the direct method we generally calculate

Cash from Operating Activities =

Cash Operating Income- Cash Operating Expenses

**Cash Operating income includes Cash sales, Cash received from debtors or
customers in case of credit sales, other operating cash such as Commission,
Brokerage, Refund of tax etc.
**Cash Operating expenses includes Cash Purchase, Cash paid to suppliers and
employees and other operating expenses in cash such as wages, expenses, rent,
repairs, maintenance etc.

So we do not consider non operating income and expenses and those operating income and
expenses which are not been made through cash.

CASH SALES = TOTAL SALES NET

CREDIT SALES
TOTAL SALES = CASH SALES +
CREDIT SALES

CASH PURCHASES = TOTAL

PURCHASES NET CREDIT PURCHASES
TOTAL PURCHASES = CASH
PURCHASES + CREDIT PURCHASES
2. Indirect Method: In this method Profit and loss account is adjusted for the effect of
transactions of non cash in nature. The adjustment in carried down by adding non operating
expenses to the Net profit during the year and deducting non operating income from the net
profit. Adjustment for changes in working capital is also under this method. A typical format
under this method would be as follows:

Statement Showing Cash From Operating Activities

Balance of P/L account as per balance sheet - xxxxx

ADD: 1. Non Operating expenses and losses -- xxxx

2. Non Cash Operating expenses and losses xxxx

3. Increase in Current liability -- xxxx

4. Decrease in Current Asset -- xxxx

--------------------

- xxxx

LESS: 1. Non operating income and gains --xxxx

2. Non Cash operating income and gains --xxxx

3. Decrease in current liability -- xxxx

4. Increase in current Asset --xxxx

---------------------

- xxxx

-----------------------------------------

Cash from Operating Activities - xxxx

------------------------------------------
 Note: 1. It is important to keep into consideration that provision for taxation made during
the year is added and tax paid during the year is deducted while calculating cash from
operating activities.

2. It is also important to mention here that if the statement shows positive balance is
the generation of cash profit but if it shows negative balance this shows cash loss in operating
activities.

3. So far the proposed dividend is concerned the proposed dividend of current year is
added in calculating cash from operating activities and proposed dividend of the previous year
is treated as the payment of dividend which is recorded in calculating cash from financial
activities.

2. Calculation of cash from financial activities

This statement is prepared for knowing the cash from financial activities during the period. It is
prepared by recording the changes made in the amount of long term liabilities and the share
capital of any corporate concern during the particular period. Increase in the amount of share
capital and long term liability denotes the inflow of cash and decrease in the share capital as
well as in the amount of long term liabilities denotes the outflow of cash during the period.
Payment of dividend is also considered for calculating cash from financial activities. The
precise format is given as:

ADD: SHARE CAPITAL XXXX

LESS: DEBENTURE XXXX

LESS: PAYMENT OF DIVIDEND XXXX

(PREVIOUS YEAR) ____________________________

CASH GAIN (+) OR Loss (-) xxxx

3. Statement showing cash from Investment Activities
This statement records the changes in the amount of fixed assets by keeping in view their
increase or decrease during the period. Increase fixed asset denotes outflow of cash and
decrease in fixed assets denotes inflow of cash in the normal situation.

Thus on the basis of the comparison between inflow and outflow of the cash we calculate the
amount of cash as generated or lost during the period from investment activities.

INCREASE IN ASSETS = OUTFLOW OF CASH

DECREASE IN ASSETS = INFLOW OF CASH

STATEMENT

ADD: SALE OF PLANT AND MACHENARY - XXXX

SALE OF LAND - XXXX

LESS: PURCHASES OF LAND - XXXX

PURCHASE OF MACHENARY - XXXX

DEPRECIATION OF PLANT - XXXX

----------------------------------------------

CASH FROM INVESTMENT ACTIVITIES - XXXX

4. CASH FLOW ANALYSIS
This statement is prepared in the last for showing the actual availability of cash and justifying
the existing closing balance of the cash and bank available with the concern during the period.
It is consolidated statement where the balance of all the previous statement is recorded. It is
prepared in the format as follows:

CASH FLOW STATEMENT

1. CASH FROM OPERATING ACTIVITIES (+ OR - ) - XXXX

2. CASH FROM FINANCIAL ACTIVITIES (+ OR - ) - XXXX

3. CASH FROM INVESTMENT ACTIVITIES (+ OR -) - XXXX

---------------------------------------

(+ OR -) - XXXX

ADD: OPENING CASH AND BANK BALANCE - XXXX

CLOSING CASH AND BANK BALANCE - XXXX

(From balance sheet)