Cashflow-Project-Sandhya Hema Full

PREFACE
Cash flow analysis is the study of the cycle of your business' cash inflows and outflows,
with the purpose of maintaining an adequate cash flow for your business, and to provide
the basis for cash flow management. Cash flow analysis involves examining the
components of your business that affect cash flow, such as accounts receivable, inventory,
accounts payable, and credit terms. By performing a cash flow analysis on these separate
components, you'll be able to more easily identify cash flow problems and find ways to
improve your cash flow. Cash-flow in financial analysis means net income or profit
obtained after adding back expense items which currently do not use cash such as
depreciation. It may also exclude revenue items, which do not currently provide funds. It
comes in two varieties — gross and net. Depreciation is not a tangible expense which is
paid for by drawing a cheque but is a sum set aside each year, whether there is profit or
not, for the replacement of an asset when it is worn-out. Such sums of money can be used
to buy new plant or they can be kept in a bank, invested in gilt-edged securities or used in
any way that the directors may choose. They, in fact form part of the “cash-flow” which
is the amount retained in the business after paying off all expenses including taxes and
dividends. Gross cash-flow is the net profit after tax plus the provision for depreciation.
Net cash-flow is obtained from the gross figure by deducting the amount distributed as
dividend on preference and ordinary shares. Of the two, net cash-flow is the more
important and commonly used because it represents the actual amount of cash retained in
the business after all outgoings including dividends. It is frequently assumed that there
will always be a cash-flow at least equal to the provision for depreciation or other
adjustments not involving cash. This will be true only if the total revenue (sales and other
income) for a period fully covers all of the expenses including depreciation and other
write-offs. If the operations for a period result in a loss and if the loss exceeds the “non-
cash” adjustments, the cash-flow will be negative instead of being positive.
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CHAPTER-1
INTRODUCTION
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INTRODUCTION
CASH FLOW STATMENT
Cash Flow Statement Overview
The cash flow statement shows a company's money flow in and out over a fixed period
of time. Most companies report their cash flow statement on a quarterly or monthly
basis. The cash flow is broken out into three reporting areas: (1) Operating, (2) Investing,
and (3) Finance. The cash flow statement was originally known as the flow funds
statement or statement of changes in financial position.
The statement of cash flow reports the movement of cash into and out of your business in
a given year. Cash is the lifeblood of your company. Cash includes currency, checks on
hand, and deposits in banks. Cash equivalents are short-term, temporary investments such
as treasury bills, certificates of deposit, or commercial paper that can be quickly and
easily converted to cash.
Your business will use cash to pay bills, repay loans, and make investments, allowing you
to provide goods and services to your customers. Your company will use cash to generate
even more cash as a result of higher profits. The cash flow statement reports your
business’ sources and uses of cash and the beginning and ending values for cash and cash
equivalents each year. It also includes the combined total change in cash and cash
equivalents from all sources and uses of cash.
It is imperative that you, the business owner, be able to successfully prepare a statement
of cash flow. This discussion provides a detailed look into the various sections of a cash
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flow statement. It also describes two methods used to calculate cash flow from operating
activities, indirect and direct with examples that will give you an edge when it comes
time to prepare a cash flow statement of your own.
Purpose of the Cash Flow Statement
The cash flow statement is intended to provide information on a firm's liquidity or

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

 returns on investments and servicing of finance
 taxation
 capital expenditure and financial investments
 acquisitions and disposals
 equity dividends paid
 management of liquid resources
 financing
The returns on investments and servicing of finance includes dividends received (e.g.
from subsidiaries) and interest from fixed interest securities and bank deposits. It will
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also show payments to lenders: both banks and holders of a company's fixed interest
securities.
Capital investments and financial investments will show the cash flow relating to the
purchase and disposal of fixed assets. Liquid resources are cash and liquid, short term,
investments.
All items in the cash flow statement can be significantly different from equivalent items
on the P & L. This is what makes the cash flow so valuable (it is not susceptible to
manipulation), but it can also make it less meaningful (there are good reasons for
accruing in the other accounting statements).
Operating cash flow is very often looked at by investors. The capital expenditure item is a
quicker way of finding out how heavily the company is investing than looking at the
balance sheet (and then correcting for depreciation etc.) but it has two weaknesses: it
does not record purchases not yet paid for and it does not allow one to separate capital
expenditure on operating assets from long term financial investments.
A more complex use of the cash flow statement is the calculation of free cash flow, which
can be used in valuation ratios and DCF valuations. All the items in the cash flow
statement provide a useful check on items in the other accounting statements and are a
vital input to the financial models used for forecasting.
The bulk of the positive cash flow stems from cash earned from operations, which is a
good sign for investors. It means that core operations are generating business and that
there is enough money to buy new inventory. The purchasing of new equipment shows
that the company has cash to invest in inventory for growth. Finally, the amount of cash
available to the company should ease investors' minds regarding the notes payable, as
cash is plentiful to cover that future loan expense.
Of course, not all cash flow statements look this healthy, or exhibit a positive cash flow.
But a negative cash flow should not automatically raise a red flag without some further
analysis. Sometimes, a negative cash flow is a result of a company's decision to expand
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its business at a certain point in time, which would be a good thing for the future. This is
why analyzing changes in cash flow from one period to the next gives the investor a
better idea of how the company is performing, and whether or not a company may be on
the brink of bankruptcy or success.
Tying the CFS with the Balance Sheet and Income Statement
As we have already discussed, the cash flow statement is derived from the income
statement and the balance sheet. Net earnings from the income statement is the figure
from which the information on the CFS is deduced. As for the balance sheet, the net cash
flow in the CFS from one year to the next should equal the increase or decrease of cash
between the two consecutive balance sheets that apply to period that cash flow covers.
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SCOPE OF THE STUDY
This study is going to help, in identifying the causes of satisfaction or

dissatisfaction regarding company financial activities. This study also describes
certain factors that explain measures that how we can make financial system more
effective. It is helpful in doing short term planning as it provides information
regarding the sources and utilization of cash during a period, so it became easier
for management to assess whether it will have adequate cash to meet day to day
expenses and pay creditors in time. It is also useful in preparing cash budget for
the future period as it informs the management about surplus or deficit periods of
cash. So it is helpful in planning the investment of surplus cash in short term
investments and to plan short term credit in advance for deficit periods. This study
is also helpful in knowing trends and speed at which the current assets and current
liabilities are being paid. It also reveals how the company take help of cash flow
statement to ascertain the position of cash generated from operating activities
which can be used for payment of dividend.
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OBJECTIVE OF THE STUDY
“To analyze the cash flow statement” in Indoasian Fusegear Ltd to study the
deviation of cash from earning. ”
SUB OBJECTIVES OF THE STUDY
 Cash flow statement analysis is useful for company short term financial
planning
 Useful in preparing the cash budget
 Another objective of analysis of cash flow statement is comparison with the
cash budget
 To study the trend of cash receipts and payments
 To explains the deviations of cash from earnings
 To know the cash flow from various activities separately
 To raise the funds in a manner that the cost of capital is minimum
 To ensure flexibility in capital structure so that changes in the sources of funds
may be made according to the changing situation
 To ensure sufficient liquidity of funds
 Suggesting the new ways and new techniques which can be introduced to the
existing financial system, to improve its effectiveness and usefulness.
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RESEARCH
METHODOLOGY
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RESEARCH METHODOLOGY
Research simply means ‘search for knowledge’. According to Rodman and Mory,
research is ‘systemized effort to gain new knowledge’. Some people consider
research as a movement from known to unknown; it is actually a voyage of
discovery. According to Clifford Woody, research includes defining and
redefining problem, formulating hypothesis or the suggested solutions, collecting
organizing and evaluating data, reaching conclusions and at last carefully testing
the conclusions to determine whether they fit to the formulated hypothesis or not.
Research methodology has many dimensions, it includes not only the research
methods but
also consists the logic behind the methods used in the context of the study and
explains why
only a particular method of technique had been used so that search lend
themselves to
proper evaluation. Thus in a way it is a written game plan for concluding
research.The
term research refers to search of something new that can solve a problem.
Research must
have a specific objective which is called research problem. On the basis of the
problem,
researcher sets hypothesis. The goal of the research process is to produce new
knowledge, which takes three main forms:
 Exploratory research:- which structures and identifies new problems
 Constructive research:- which develops solutions to a problem
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 Empirical research:- which tests the feasibility of a solution using empirical
evidence
 Casual research:- which is related to day to day problems or for casual proble
RESEARCH DESIGN
The research design used here is Exploratory Research Design .I have to study
the
Cash flow statement .So I need to enquire about financial activities and cash
involved in them. So availability of cash flows is collected by people related with
company financial sector and based on the reports I have to explore the factors
that really help me in analysis of cash flow statement.. Since the major emphasis
was
on the discovery of ideas and insights into the facts, the research design most
appropriate
must be flexible enough to permit the consideration of many different aspects
of a
phenomenon.
The methods used in context of this research design are:
(1) The survey of concerning literature,
(2) Experience Survey.
The important features of this research design are listed as follows:
 The sampling design used is Non-Probability Sampling design and it is flexible in
nature.
 There is a no pre-planned design for the analysis.
 There is structured instrument for the collection of the data i.e. company cash
flow statement
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 No fixed decisions about the operational procedures.
SAMPLING DESIGN
1. Sampling Unit
It defines the unit of target population that will be sampled i.e. it answers who is
to be surveyed. Sampling unit in my study will be individual employees of Vijaya
Dairy who are indulging in making financial activities.
2. Sampling Techniques
This refers to the procedure by which the respondents should be chosen. In this
study, Non Probability sampling of the following type is used:-
 Convenience sampling
Sample Size
It indicates the number of people to be surveyed. Through large sample give more
reliable results than small samples but due to constraints of time and money the sample
size was restricted to few respondents.
Area of Study
Though other methods are important, but this method is given prime significance in
modern research because of its extensive use to study the relationship of different
factors, attitudes and practices of society and to explore the problems that cannot be
treated by experiment methods.
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SOURCES OF DATA COLLECTION:
The data can be collected from secondary sources. The basic premises of my study
are supplemented with the secondary data.
1. Primary Data
 Personal Investigation
 Observation Method
 Information from correspondents
 Information from superiors of the organization
2. Secondary Data
 Unpublished Sources such as Company Internal reports prepare by them
given to their analyst & trainees for investigation.
 Websites like Vijaya Dairy official site, some other sites are also searched
to find data.
ANALYSIS AND REPORTING THE FINDINGS
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 Compilation of data through statement
 Presentation of findings
 Suggestions and conclusions
CHAPTER-3
INDUSTRY PROFILE
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DAIRY INDUSTRY IN INDIA
The dairy industry in India is going through major changes with the liberalization
policies of the government and restructuring of the economy. These have brought greater
participation of the private sector. This is also consistent with global trend which could
hopefully lead greater integration at Indian dairying with the world market for milk and
milk product.
After stagnating to 80 million tones for 20 years between 1950 and 1970 Indian
milk production began to rise. Crossing 30 million tons in 1980 and 59 million tones in
1992.Today India ranks as the world second largest milk producer after the U.S.
DAIRY INDUSTRY IN ANDHRA PRADESH
The main occupation of Andhra Pradesh is Cultivation. The village reflects

the Social, Economic, Moral and Culture of Human Race. Dairy Stands as the Back-
bone of Agriculture at the same time it place important activity for stability of Rural
Economic Conditions and helps to maintain Nations health by supplying sweet milk.
It provides not only income but also income to the Milk producers. Now the
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productions of milk become a subsidiary occupation among marginal farmers, small
farmers and Agricultural labor.
The programme of Dairy Industry was matted with commendable help of the
United Nations International children’s Emergency fund, Food and Agricultural
Organizations and freedom from Hunge co-campaign organizations of U.K. these
Organizations lit of this establishment of dairy units at Hyderabad and Vijayawada in
1969 respectively which lead to pioneer Dairy development program in Andhra
Pradesh. Later to set cooling and chilling centers have been set up to feed these two
gigantic units.
The Government of Andhra Pradesh has started Dairy Development

Corporation to safe guard the interests of milk producers And ensuring supply of
fresh milk at reasonable price to urban consumers as an our come A.P.D.D.C
provided employment to nearly 20 employees and organize as many as 87 dairy
units including 7 milk factories, 13 district dairies, 22 chilling centers, 24 mini
chilling centered, 18 cooling centers, and 15 mini cooling centers. In addition to that
the private units are contributing Their little mite in their development of the dairy
industry. M/S Hindustan Milk Foods that have started a malted milk products
Factory at Rajamundry. Further to enhance working efficiency and to increase
turnover, the Government an autonomous dairy Collection development corporation.
As a result of these measures the dairy industry improving towards massive milk
collection.
The will go along way in improving the supplement income to them. Further
lucrative market for all the milk at the door steps of milk producers in a village at
fair rate based on the two access policy is assured it could handle all the milk with its
network of chilling and cooling centers. More than 3.5 Laksh milk producers get 20
crores per anum for supplying of the milk, which 69% of total beneficiaries belong
to small and marginal farmers, Agricultural laborers and other weaker sections of the
society. All the efforts by A.P.D.D.C. and N.D.D.B. today Andhra has excellent
potential for milk production with progressive farmers. Who are more receipts to the
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new technology and scientific practices, the estimate milk production is 40 Lakhs
per day.
DAIRY SCENARIO:
Milk is an important nutritious food. It is more important to infants and old people. Large
number of people depends upon milk as an important source of nourishment. India with
its vast population gives sentimental attachment to milk as a good food. Milk is substance
with 1.029 to 1.035 specific
Gravity and contains fat minerals proteins and vitamins. The government of
India encouraged co-operative societies for production of milk and its products and
setting up process of large milk units.
India is today second largest producer of the milk in the world. Second only is the
U.S.A contributing 11% of the world market. The production of milk in India is 577
Lakes of tones per year. It may be seen that the milk procurement by the organized sector
is presently a fraction of the total milk available. There is sufficient scope for
procurement of milk and for the growth of the milk sector. With high quality technology
and expertise available indigenously and with the milk and milk product s order
announce by the government enabling the private sector to deal directly with farmer.
Organized handling of milk would lead to proper procurement measures.
Which would in turn be beneficial to farmers? Remunerative price to farmers would lead
to better care of cattle and there by set in motion a healthy cycle of increased availability
of good milk.
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WORLD FOCUS ON INDIAN DAIRY
Indian dairying is emerging as a Sunrise Industry India represents one of the

worlds largest and fastest growing markets for milk the 250 million strong classes.
Two main reasons for the world focus on India are one, the low cost economy:
and two the liberalization process initiated since 1991. Other important factors include:
Iowa inflation rate, inexpensive labor the presence of the world’s third largest pool of
technical man power, the world’s largest democracy.
Efforts to increase milk product by dairy farmers are strongly influenced by the
degree to which demand signals are transmitted through the marketing system. Co-
operative has played an important role in transmitting the message of urban market
demand to them.
COMPETITIVE ADVANTAGES OF INDIAN DAIRY
In the emerging liberalized global scenario, trade distorting agriculture policies

has been the focus of the GATT multilateral trade negotiation. With the liberalization of
agricultural trade under the new GATT regime, the heavy subsides prevalent in the dairy
sector in the countries of the European Union as well as in the US will have to be brought
down in the next few years .The competitive advantage of the Indians dairy industry are
then considered to be substantial. With the substantial and continued investment in
building up milk production. Indian can emerge as a major exporter of dairy products, at
least by the early part of the next century , even through an prospects, at least by the
early part of the next century, even though an prospects may meet with considerable
opposition form the advanced dairy nation and this opposition is likely to focus
significantly on quality issues.
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It is therefore necessary to evolve a long – term dairy industry policy that will not
sustain but also enhance production and productive levels. This would require ensuring
remunerative and increased returns. To the farmer while ensuring supply of increased
fluid milk needs of the urban population at reasonable prices.
COMPANY PROFILE
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COMPANY PROFILES
As the years passed, APDDCF built up the infrastructure needed to meet every
requirement of dairying, the procurement of milk from over 8,00,000 dairy farmers
spread across Andhra Pradesh. Or getting it ready for nationwide distribution. It all
happened with in the vast Dairy plant network of APDDCF through extensive use of high
technology and management acumen honed to steer such a widespread operation and
brought prosperity to the state many times.
The federation has drawn up more comprehensive system for procurement and
processing of milk.
A dedicated research cell is actively pursuing way and means of bettering quality.
Collaboration with global experts is also being sought, all in the attempt to remain at the
forefront of modern dairying in India where QUALITY will be the watch world.
REACHING OUT OF THE WORLD
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APDDCF began its exports efforts thirteen years ago and has gained significant ground
abroad. It has spread its marketing network in the Gulf and is exploring the possibility of
exporting diary products like Butter, Ghee, Spread, UHT Milk; Sterilized cream etc., to
other countries the federation has been meeting the tastes of divergent cultures, while
bringing back the pleasure of home to Non-resident India.
Today, APDDCF is in process of acquiring capabilities to join the big league in diary
technology from U.S.A, U.K, Australia, New Zealand and the Netherlands.
VIJAYA DIARY AT A GLANCE
Name of the Organization : Vijaya Diary Limited
Nature of the business : Liquid Milk, Ghee, Butter milk
Basic raw material : Milk
Procuring the raw material : Co-operative Milk Society Boots.
Year of establishment : 1969
Plant Location : Venkateswara puram, Nellore.
Plant Capacity (per day) : 75000 Liters
Promoters : AP Milk Co-Operative Society, Hyd.
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DIARY DEVELOPMENT ACTIVITIES IN NELLORE DISTRICT
During the year 1969, the Nellore dairy was started with initial capacity
Of 12,000 liters per day mostly to collect milk from surrounding villages. After wares
due to increase in procurement the handling capacity was expanded to 40,000 liters per
day during the year 1979. The Milk Chilling Centers at Kavali was started during the
year 1977 with an initial capacity of 6,000 liters per day. Similarly the Milk Chilling
center at Venakatgiri was started during the year 1981 with the same capacity.
During the year 1985, due to increase in Milk procurement in the district the
handling of Milk chilling center Kavali and Venkatagiri has been increased from 6,000
liters to 12,000 liters per day. In the year 1986, the Nellore Milk Union was registered
under AP Co. OP Societies Act 1964.
Due to further increase in the Milk procurement the present handling capacity of
Nellore Diary is expanded to 40,000 its to 75,000 its per day and Milk Chilling Center
Kavali also expanded from 12,000 its to 20,000 its per day under O.F.III Programmed in
1993. Another Milk Chilling Center in the district at Dutttalur with handling capacity of
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10,000 it’s per day was started in month of October 1995 and subsequently expanded
20,000 its per day during the year 1998.
At present there are nearly 57,360 milk producers supplying milk to Nellore Union
out of which there are small farmers 23,960 marginal farmers 8,300. Among these milk
producers there are Schedule Caste 8,152, Schedule Tribes 697, Backward Class 11,612
and the remaining Other Castes are supplying milk to these Unions and they are being
benefited financially by sales of milk by and amount of Rs.210 Lakhs is being paid the
Milk Producers per month.
The data related to the above development of Nellore Diary has been shown following
table.
TABLE 1.1
PERFORMANCE OF DAIRY IN NELLORE (DIST)
NAME OF THE CAPACITY PER PRESENT PER PEAK ON ANY DAY

UNIT DAY DAY OF THE YEAR
Nellore Dairy 75,000 Liters 36,000 Liters 43,000 Liters
Kavali Dairy 30,000 Liters 12,000 Liters 17,000 Liters
Venkatagiri Dairy 12,000 Liters 12,000 Liters 12,000 Liters
Duttalur Dairy 22,000 Liters 22,000 Liters 22,000 Liters
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BRIEF NOTE OF MARKETING DIVISION
The Andhra Pradesh Dairy Development Federation has got 6 product –
manufacturing units in Andhra Pradesh namely
a. Milk Products Factory, Hyderabad.
b. Milk Products Factory, Chittore.
c. Milk Products Factory, Nandyal.
d. Milk Products Factory, Proddutoor.
e. Sangam Dairy Products Factory, Vadlamudi.
f. Milk Products, Vijayawada.
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g. The products manufactured by these units are being sold under brand
name of “VIJAYA”. The products generally produced for the National
Market are:
1. Skim Milk Powder.
2. White Milk Powder.
3. Vijaya Spray.
4. Table Butter.
5. Cheese.
6. Ghee and White Butter.
SPEACILITIES OF VIJAYA DAIRY
1. Only milk producing company which exports its products to Malaysia.
2. Only Dairy offering five varieties of milk for the benefit of the
consumers.
3. A Wide range of milk produced under “VIJAYA DAIRY”
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4. Range of UHT processed milk and milk products with shelf life of 4
months.
5. A large Distribution Network.
BY-PRODUCTS:
In addition to milk the following by-products are also being Manufactured and
marketed by the dairy.
 Butter milk
 Basundhi
 Curd
 Sweet Lassie
 Flavored Milk
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 Paneer
 Cooking butter
 Doodh Peda
 Milk Cake
 Ghee
 Skim milk powder
Strict quality controls are adopted before releasing the product to the
market. .The brand name is well established and is known for its quality.
FINANCIAL SUPPORT:
The dairy is established with the financial assistance from Andhra Pradesh
State Financial Corporation and the equity capital raised from the shareholders.
EXPANSION PROPOSALS:
1. New Milk Cooling Centers are Doravarisatram and Nellorepalem:
The MCC Venkatagiri has been located at South West Corner, with respect to
Milk procurement areas. As a result almost all the routs vehicles were to run
idle from Gudur to Venkatagiri about 40 Kms. As a result the quality of Milk
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is getting deteriorated apart from the abnormal transport cost, moreover
certain Mandals like Naidpet, Sullurpet, Tada and Pellakur are not covered,
where there is good Milk Potentiality.
In view of the above, one Bulk Cooling center of 5000 Lts. Per day
capacity is established at D.V.Satram and is functioning from 21.4.2000.
Similarly one more Bulk cooling center was established at Nellorepalem
and it is functioning from 14.6.03.
2. Bulk cooling center at Adurpalli, Seethaamapuram and Rapur:
Similarly three more Bulk Cooling Centers of 5000 Lts per day capacity are
proposed one each at Adurupalli, Seethamapuram and Rapur with an
estimated cost of Rs.23.00 Lakhs each to cover more number of remote
villages.
CHAPTER-4
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CONCEPT OF CASH
FLOW ANALYSIS
CONCEPT OF CASH FLOW ANALYSIS
INTRODUCTION TO CASH FLOW STATEMENTS
Cash flow is essentially the movement of money into and out of your
business; it's the cycle of cash inflows and cash outflows that determine your business'
solvency.
Cash flow analysis is the study of the cycle of your business' cash
inflows and outflows, with the purpose of maintaining an adequate cash flow for your
business, and to provide the basis for cash flow management.
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Cash flow analysis involves examining the components of your business
that affect cash flow, such as accounts receivable, inventory, accounts payable, and credit
terms. By performing a cash flow analysis on these separate components, you'll be able to
more easily identify cash flow problems and find ways to improve your cash flow.
Cash-flow in financial analysis means net income or profit obtained after

adding back expense items which currently do not use cash such as depreciation. It may
also exclude revenue items, which do not currently provide funds. It comes in two
varieties — gross and net.
Depreciation is not a tangible expense which is paid for by drawing a

cheque but is a sum set aside each year, whether there is profit or not, for the replacement
of an asset when it is worn-out. Such sums of money can be used to buy new plant or
they can be kept in a bank, invested in gilt-edged securities or used in any way that the
directors may choose. They, in fact form part of the “cash-flow” which is the amount
retained in the business after paying off all expenses including taxes and dividends.
Gross cash-flow is the net profit after tax plus the provision for
depreciation. Net cash-flow is obtained from the gross figure by deducting the amount
distributed as dividend on preference and ordinary shares. Of the two, net cash-flow is the
more important and commonly used because it represents the actual amount of cash
retained in the business after all outgoings including dividends.
It is frequently assumed that there will always be a cash-flow at least

equal to the provision for depreciation or other adjustments not involving cash. This will
be true only if the total revenue (sales and other income) for a period fully covers all of
the expenses including depreciation and other write-offs. If the operations for a period
result in a loss and if the loss exceeds the “non-cash” adjustments, the cash-flow will be
negative instead of being positive.
CONCEPT OF CASH FLOW STATEMENT
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Cash Flow Statement
Cash flow statement may provide considerable information about

what is really happening in a business beyond that contained in either the income
statement or the balance sheet. Analyzing this statement should not present an
intimidating task; instead it will quickly become obvious that the benefits of
understanding the sources and uses of a company’s cash far outweigh the costs of
undertaking some very straightforward analyses.
Format of the Cash Flow Statement

• The cash flow statement is divided into three sections:
o Cash flow from operating activities: shows the results of cash inflows and outflows
related to the fundamental operations of the basic line or lines of business in which the
company engages. (Example: cash receipts from the sale of goods or services and cash
outflows for purchasing inventory and paying rent and taxes.)
o Cash flow from investing activities: associated with purchases and sales of non-current
assets (Example: building and equipment purchases or sales of investments or
subsidiaries.)
o Cash flow from financing activities: associated with financing the firm (Example:
selling and paying off bonds and issuing stock and paying dividends)
• Exceptions
o Short-term marketable securities are treated as long-term investments and appear in

cash flow from investing activities
o Short-term debt is treated as long-term debt and appears in cash flow from financing
activities
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o Although dividends are handled as a cash outflow in the cash flow from financing
activities section, interest payments are considered an operating outflow, despite the fact
that both are payments to outsiders for using their money.
BENEFITS OF THE CONCEPT

Critics point out that the term cash-flow, meaning net profit
inclusive of the provision for depreciation and similar non-cash transactions, is a
misnomer since it implies that because of the write-back of expense items like
depreciation which do not currently use cash, additional cash has flown into the business
when nothing of the sort has really happened. All that has been achieved by adding back
to the net profit the provision for depreciation and other non-cash transactions is to put on
a cash basis the annual accounts originally written on the accrual basis.
The critics, nevertheless, admit that cash-flow is a valid analytical tool which, when
correctly used, helps explain:
1. How companies are able to finance large-scale expansion or modernization, or
repay heavy borrowings without resorting to fresh equity financing, and
2. Reconcile the difference in the net profit of companies operating within the same
industry and otherwise comparable on the basis of their capitalizations, product-mix, and
over-all management policies.
The revenue earned by a company from its operations appears on its profit and loss
account for the year as “Sales and Other Income”. After deducting from this the expenses
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of the business including depreciation and income tax, there is left a balance commonly
termed the net profit (or loss) for the year.
But, unlike the out of pocket expenses like raw material costs, salaries, wages, etcetera,
depreciation and similar provisions do not represent current outlays of cash. To arrive at
the true spending power generated through operation it is necessary to add back to the net
profit the items which do not constitute either a source or a disposition of cash such as
depreciation which is one of the heaviest “expense” items listed on the profit and loss
account.
PREPARATION AND PRESENTATION OF CASH FLOW STATEMENT
The presentation of cash flow statement is carried out in two alternative formats that are
either through direct method or indirect method. The difference in these two methods lies
in their presentation of ‘Cash flows from operating activities’. In the direct method,
operating cash receipts and payments are reported directly. In the indirect method, cash
flows from operating activities are reported by way of adjustments of the reporting
period’s net profit reported in the profit and loss account.
Definitions:
The following terms are used in this statement with the meanings specified:
Cash comprises cash on hand and demand deposits with banks.
Cash equivalents are short term, highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of changes in
value.
Cash flows are inflows and outflows of cash and cash equivalents.
33
Operating activities are the principal revenue-producing activities of the enterprise and
other activities that are not investing or financing activities.
Investing activities are the acquisition and disposal of long-term assets and other
investments not included in cash equivalents.
Financing activities are activities that result in changes in the size and composition of the
owner’s capital and borrowings of the enterprise.
Cash and Cash equivalents:
Cash equivalents are held for the purpose of meeting short-term cash commitments rather
than for investment or other purposes. For an investment to qualify as a cash equivalent,
it must be readily convertible to a known amount of cash and be subject to an
insignificant risk of changes in value. Therefore, an investment normally qualifies as a
cash equivalent only when it has a short maturity of, say, three months or less from the
date of acquisition. Investments in shares are excluded from cash equivalents unless they
are, in substance, cash equivalents; for example, preference shares of a company acquired
shortly before their specified redemption date.
Cash flows exclude movements between items that constitute cash or cash equivalents
because these components are part of the cash management of an enterprise rather than
part of its operating, investing and financing activities. Cash management includes in
investment of excess cash in cash equivalents.
Presentation of a Cash Flow Statement
The cash flow statement should report cash flows during the period classified by
operating, investing and financing activities.
34
An enterprise presents its cash flows from operating, investing and financing activities in
a manner which is most appropriate to its business. Classification by activity provides
information that allows users to assess the impact of those activities on the financial
position of the enterprise and the amount of its cash and cash equivalents. This
information may also be used to evaluate the relationships among those activities.
A single transaction may include cash flows that are classified differently. For example,
when the instalment paid in respect of a fixed asset acquired on deferred payment basis
includes both interest and loan, the interest element is classified under financing activities
and the loan element is classified under investing activities.
Operating Activities
The amount of cash flows arising from operating activities is a key indicator of the
extent to which the operations of the enterprise have generated sufficient cash flows to
maintain the operating capability of the enterprise, pay dividends, repay loans and make
new investments without recourse to external sources of financing. Information about the
specific components of historical operating cash flows is useful, in conjunction with other
information, in forecasting future operating cash flows.
Cash flows from operating activities are primarily derived from the principal revenue-
producing activities of the enterprise. Therefore, they generally result from the
transactions and other events that enter into the determination of net profit or loss.
Examples of cash flows from operating activities are:
(a) Cash receipts from the sale of goods and the rendering of services;
(b) Cash receipts from royalties, fees, commissions and other revenue;
(c) Cash payments to suppliers for goods and services;
(d) Cash payments to and on behalf of employees;
(e) Cash receipts and cash payments of an insurance enterprise for premiums and claims,
annuities and other policy benefits;
35
(f) Cash payments or refunds of income taxes unless they can be specifically identified
with financing and investing activities; and
(g) Cash receipts and payments relating to futures contracts, forward contracts, option
contracts and swap contracts when the contracts are held for dealing or trading purposes.
Some transactions, such as the sale of an item of plant, may give rise to a gain or loss
which is included in the determination of net profit or loss. However, the cash flows
relating to such transactions are cash flows from investing activities
An enterprise may hold securities and loans for dealing or trading purposes, in which
case they are similar to inventory acquired specifically for resale. Therefore, cash flows
arising from the purchase and sale of dealing or trading securities are classified as
operating activities. Similarly, cash advances and loans made by financial enterprises are
usually classified as operating activities since they relate to the main revenue-producing
activity of that enterprise.
Investing Activities
The separate disclosure of cash flows arising from investing activities is important
because the cash flows represent the extent to which expenditures have been made for
resources intended to generate future income and cash flows. Examples of cash flows
arising from investing activities are:
(a) Cash payments to acquire fixed assets (including intangibles).
These payments include those relating to capitalized research and development costs and
self-constructed fixed assets;
36
(b) Cash receipts from disposal of fixed assets (including intangibles); Cash Flow
Statements
(c) cash payments to acquire shares, warrants or debt instruments of other enterprises and
interests in joint ventures (other than payments for those instruments considered to be
cash equivalents and those held for dealing or trading purposes);
(d) cash receipts from disposal of shares, warrants or debt instruments of other enterprises
and interests in joint ventures (other than receipts from those instruments considered to
be cash equivalents and those held for dealing or trading purposes);
(e) Cash advances and loans made to third parties (other than advances and loans made
by a financial enterprise);
(f) Cash receipts from the repayment of advances and loans made to third parties (other
than advances and loans of a financial enterprise);
(g) cash payments for futures contracts, forward contracts, option contracts and swap
contracts except when the contracts are held for dealing or trading purposes, or the
payments are classified as financing activities; and
(h) Cash receipts from futures contracts, forward contracts, option contracts and swap
contracts except when the contracts are held for dealing or trading purposes, or the
receipts are classified as financing activities.
When a contract is accounted for as a hedge of an identifiable position, the cash flows of
the contract are classified in the same manner as the cash flows of the position being
hedged.
Financing Activities
The separate disclosure of cash flows arising from financing activities is important
because it is useful in predicting claims on future cash flows by providers of funds (both
capital and borrowings) to the enterprise.
Examples of cash flows arising from financing activities are:
(a) Cash proceeds from issuing shares or other similar instruments;
(b) Cash proceeds from issuing debentures, loans, notes, bonds, and other short or long-
term borrowings; and
37
(c) Cash repayments of amounts borrowed.
REPRTING OF CASH FLOWS
Reporting Cash Flows from Operating Activities

An enterprise should report cash flows from operating activities using either:
(a) The direct method, whereby major classes of gross cash receipts and gross cash
payments are disclosed; or
(b) the indirect method, whereby net profit or loss is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals of past or future
operating cash receipts or payments, and items of income or expense associated
with investing or financing cash flows.
The direct method provides information which may be useful in estimating future cash
flows and which is not available under the indirect method and is, therefore, considered
more appropriate than the indirect method. Under the direct method, information about
major classes of gross cash receipts and gross cash payments may be obtained either:
(a) From the accounting records of the enterprise; or
(b) By adjusting sales, cost of sales (interest and similar income and interest expense and
similar charges for a financial enterprise) and other items in the statement of profit and
loss for:
i) changes during the period in inventories and operating receivables and payables;
ii) Other non-cash items; and
iii) Other items for which the cash effects are investing or financing cash flows.
Under the indirect method, the net cash flow from operating activities is determined by
adjusting net profit or loss for the effects of:
38
(a) Changes during the period in inventories and operating receivables and payables;
(b) Non-cash items such as depreciation, provisions, deferred taxes and unrealized
foreign exchange gains and losses; and
(c) All other items for which the cash effects are investing or financing cash flows.
Alternatively, the net cash flow from operating activities may be presented under the
indirect method by showing the operating revenues and expenses excluding non-cash
items disclosed in the statement of profit and loss and the changes during the period in
inventories and operating receivables and
Payables.
Reporting Cash Flows from Investing and Financing Activities

An enterprise should report separately major classes of gross cash receipts and gross cash
payments arising from investing and financing activities, except to the extent that cash
flows described in paragraphs 22 and 24 are reported on a net basis.
Reporting Cash Flows on a Net Basis
22. Cash flows arising from the following operating, investing or financing activities may
be reported on a net basis:
(a) Cash receipts and payments on behalf of customers when the cash flows reflect the
activities of the customer rather than those of the enterprise; and
(b) Cash receipts and payments for items in which the turnover is quick, the amounts are
large, and the maturities are short.
23. Examples of cash receipts and payments referred to in paragraph 22(a) are:
39
(a) The acceptance and repayment of demand deposits by a bank;
(b) Funds held for customers by an investment enterprise; and
(c) Rents collected on behalf of, and paid over to, the owners of properties.
Examples of cash receipts and payments referred to in paragraph 22(b) are advances
made for, and the repayments of:
(a) Principal amounts relating to credit card customers;
(b) The purchase and sale of investments; and
(c) Other short-term borrowings, for example, those which have a maturity period of
three months or less.
24. Cash flows arising from each of the following activities of a financial enterprise
may be reported on a net basis:
(a) Cash receipts and payments for the acceptance and repayment of deposits with a fixed
maturity date;
(b) The placement of deposits with and withdrawal of deposits from other financial
enterprises; and
(c) Cash advances and loans made to customers and the repayment of those advances and
loans.
Extraordinary Items
The cash flows associated with extraordinary items should be classified as arising from
operating, investing or financing activities as appropriate and separately disclosed.
The cash flows associated with extraordinary items are disclosed separately as arising
from operating, investing or financing activities in the cash flow statement, to enable
users to understand their nature and effect on the present and future cash flows of the
enterprise. These disclosures are in
40
addition to the separate disclosures of the nature and amount of extraordinary items
required by Accounting Standard (AS) 5, Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies.
Interest and Dividends
Cash flows from interest and dividends received and paid should each be disclosed
separately. Cash flows arising from interest paid and interest and dividends received in
the case of a financial enterprise should be classified as cash flows arising from operating
activities. In the case of other enterprises, cash flows arising from interest paid should be
Classified as cash flows from financing activities while interest and dividends received
should be classified as cash flows from investing activities. Dividends paid should be
classified as cash flows from financing activities.
The total amount of interest paid during the period is disclosed in the cash flow statement
whether it has been recognized as an expense in the statement of profit and loss or
capitalized in accordance with Accounting Standard (AS) 10, Accounting for Fixed
Assets.
Interest paid and interest and dividends received are usually classified as operating cash
flows for a financial enterprise. However, there is no consensus on the classification of
these cash flows for other enterprises. Some argue that interest paid and interest and
dividends received may be classified as operating cash flows because they enter into the
determination of net profit or loss. However, it is more appropriate that interest paid and
interest and dividends received are classified as financing cash flows and investing cash
flows respectively, because they are cost of obtaining financial resources or returns on
investments.
Some argue that dividends paid may be classified as a component of cash flows from
operating activities in order to assist users to determine the ability of an enterprise to pay
dividends out of operating cash flows. However, it is considered more appropriate that
41
dividends paid should be classified as cash flows from financing activities because they
are cost of obtaining financial resources.
Taxes on Income
Cash flows arising from taxes on income should be separately disclosed and should be
classified as cash flows from operating activities unless they can be specifically identified
with financing and investing activities.
Taxes on income arise on transactions that give rise to cash flows that are classified as
operating, investing or financing activities in a cash flow statement. While tax expense
may be readily identifiable with investing or financing activities, the related tax cash
flows are often impracticable to identify and may arise in a different period from the cash
flows of the underlying transactions. Therefore, taxes paid are usually classified as cash
flows from operating activities. However, when it is practicable to identify the tax cash
flow with an individual transaction that gives rise to cash flows that are classified as
investing or financing activities, the tax cash flow is classified as an investing or
financing activity as appropriate. When tax cash 5 Pursuant to the issuance of AS 16,
Borrowing Costs, which came into effect in respect of accounting periods commencing
on or after 1-4-2000, accounting for borrowing costs is governed by AS 16 from that
date.
Investments in Subsidiaries, Associates and Joint Ventures
When accounting for an investment in an associate or a subsidiary or a joint venture, an

investor restricts its reporting in the cash flow statement to the cash flows between itself
and the investee/joint venture, for example, cash flows relating to dividends and
advances. Acquisitions and Disposals of Subsidiaries and Other Business Units
42
The aggregate cash flows arising from acquisitions and from disposals of subsidiaries or
other business units should be presented separately and classified as investing activities.
An enterprise should disclose, in aggregate, in respect of both acquisition and disposal of

subsidiaries or other business units during the period each of the following:
(a) The total purchase or disposal consideration; and
(b) The portion of the purchase or disposal consideration discharged by means of cash
and cash equivalents.
The separate presentation of the cash flow effects of acquisitions and disposals of
subsidiaries and other business units as single line items helps to distinguish those cash
flows from other cash flows. The cash flow effects of disposals are not deducted from
those of acquisitions.
Non-cash Transactions
Investing and financing transactions that do not require the use of cash or cash
equivalents should be excluded from a cash flow statement. Such transactions should be
disclosed elsewhere in the financial statements in a way that provides all the relevant
information about these investing and financing activities.
Many investing and financing activities do not have a direct impact on current cash flows
although they do affect the capital and asset structure of an enterprise. The exclusion of
non-cash transactions from the cash flow statement is consistent with the objective of a
cash flow statement as these items do not involve cash flows in the current period.
Examples of non-cash transactions are:
(a) The acquisition of assets by assuming directly related liabilities;
(b) The acquisition of an enterprise by means of issue of shares; and
(c) The conversion of debt to equity.
Components of Cash and Cash Equivalents
43
An enterprise should disclose the components of cash and cash equivalents and should
present a reconciliation of the amounts in its cash flow statement with the equivalent
items reported in the balance sheet.
In view of the variety of cash management practices, an enterprise discloses the policy
which it adopts in determining the composition of cash and cash equivalents.
The effect of any change in the policy for determining components of cash and cash
equivalents is reported in accordance with Accounting Standard (AS) 5, Net Profit or
Loss for the Period, Prior Period Items and Changes in Accounting Policies.
Other Disclosures
An enterprise should disclose, together with a commentary by management, the amount
of significant cash and cash equivalent balances held by the enterprise that are not
available for use by it.
There are various circumstances in which cash and cash equivalent balances held by an
enterprise are not available for use by it. Examples include cash and cash equivalent
balances held by a branch of the enterprise that operates in a country where exchange
controls or other legal restrictions apply as a result of which the balances are not
available for use by the enterprise.
Additional information may be relevant to users in understanding the financial position

and liquidity of an enterprise. Disclosure of this information, together with a commentary
by management, is encouraged and may include:
(a) The amount of undrawn borrowing facilities that may be available for
future operating activities and to settle capital commitments, indicating
any restrictions on the use of these facilities; and
44
(b) The aggregate amount of cash flows that represent increases in operating capacity
separately from those cash flows that are required to maintain operating capacity.
The separate disclosure of cash flows that represent increases in operating capacity and
cash flows that are required to maintain operating capacity is useful in enabling the user
to determine whether the enterprise is investing adequately in the maintenance of its
operating capacity. An enterprise that does not invest adequately in the maintenance of its
operating capacity may be prejudicing future profitability for the sake of current liquidity
and distributions to owners.
45
CHAPTER-5
CASH FLOW
STATEMENT
ANALYSIS
VIJAYA DAIRY
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2008.
AS AT
PARTICULARS 31-MAR-2008
A. CASH FLOW FROM OPERATING ACTIVITIES
46
Net Profit (Loss)before tax and 3,213,455
Extra extraordinary items
Adjustments for:
Depreciation 23,518,270
Misc. Expenditure Written off 1,450
Profit on Sale of Fixed Assets (156,195)
Other Income (138,959)
Interest Received on FD (417,537)
Operating Profit (Loss) before working capital changes 26,020,484
Adjustments for:
Trade and other receivables 5,368,905

Inventories (598,394)
Trade Payables 35,504,470
Cash generated from operations 66,295,465
Taxes Paid
CASH FLOW BEFORE EXTRAORDINARY

ITEMS 66,295,465
Extraordinary items (Pro. Written back)
Net Cash From Operating Activities 66,295,465
B CASH FROM INVESTING

ACTIVITIES
Purchase of Fixed Assets (23,335,949)
Sale of Fixed Assets
Purchase Investment
Other Income 1,101,770
Net cash used in investing activities (22,234,179)
VIJAYA DAIRY
AS AT
Increase in Share Capital -
Proceeds from Long term barrowings
47
Repayment of finance/lease liabilities (5,112,701)
Repayment of Unsecured Loans -
NET CASH USED IN FINANCING ACTIVITIES (5,112,701)
Net increase in cash and cash equivalents 38,948,585

Cash and Cash equivalents as at 01-04-2003 31,899,521
(Closing balance)
Cash Inflow For the Year 2007-08

Particulars Amount
26,020,48
Operating profit 4
Decrease in Trade & Other 5,368,90
receivables 5
48
0
1,101,77
Other Income 0

Amount in Rs.
35000000
30000000
25000000
20000000
15000000
10000000
5000000
0
Operating Decrease in Trade Other Income
profit Trade & Other Payables
receivables
Items
During the year cash inflows are operating profit Rs.2,60,20,484/-, decrease in trade
recievables Rs.53,68,905/-, increase in trade payables Rs.3.31,27,250/-.
Cash Outflow For the Year 2007-08

Particulars Amount
Inventories 598,394
Purchase of Fixed Assets 23,335,949
Long term borrowings 5,112,701
49
25000000
Amount in Rs.
20000000
15000000
10000000
5000000
0
Inventories Purchase of Fixed Long term
Assets borrowings
Items
During the year cash outflows are increase in Inventories Rs.5,98,394/-, purchase of
Fixed assets Rs.2,33,35,949/- and decrease in Long term Borrowings Rs.51,12,701/-
Interpretation: During the year 2007-08 Major cash inflows are operating profit,
Decrease in Trade and other receivables and increase in Trade Payables. Major cash
outflows are Purchase of Fixed assets and Repayment long term Loans.
VIJAYA DAIRY
AS AT

50
Adjustments for:
Other Income (96,497)
Interest Received on FD (452,915)
Adjustments for:

Inventories (2,529,376)
Trade Payables (54,287,819)
Cash generated from operations (31,283,105)
Taxes Paid (153,173)

ITEMS (31,436,278)
Net Cash From Operating Activities (31,436,278)
B CASH FROM INVESTING ACTIVITIES

Sale of Fixed Assets
Purchase Investment (58,580)
Other Income 630,412
VIJAYA DAIRY
AS AT
Increase in Share Capital 25,000,000
Proceeds from Long term barrowings
51
Repayment of Unsecured Loans (7,000,000)
NET CASH USED IN FINANCING ACTIVITIES 478,245
Net increase in cash and cash equivalents (37,970,749)

(Closing balance)

Particulars Amount
Operating Profit 24,288,581
Trade & Other receivables 1,245,509
Other Income 630,412
Increase in share capital 25,000,000
52
Amount in Rs. 30000000

25000000
20000000
15000000
10000000
5000000
0
Operating Profit Trade & Other Other Income Increase in
receivables share capital
Items
During the year cash inflows are operating profit Rs.2,42,88,581/-, decrease in Trade and
other receivables Rs.12,45,509/- and Increase in share capital 2,50,00,000/-.

Particulars Amount
Inventories 2,529,376
purchase of fixed assets 7,584,548
purchase of investments 58,580
Repayment of Finance 17,521,755
53
Repayment of Unsecured loans 7,000,000

60000000
50000000
Amount in Rs.
40000000
30000000
20000000
10000000
Inventories Trade purchase of purchase of Repayment Repayment

Payables fixed assets investments of Finance of Unsecured
loans
Items
During the year cash outflows are increase in Inventory Rs.25,29,376/-, Decrease in
Trade Payables Rs.5,06,78,440/-, purchase of Fixed assets Rs.75,84,548/-, repayment of
loans Rs.1,75,21,755/-, and repayment Unsecured Loans Rs.70,00,000/-.
Interpretation: During the year 2008-09 Major cash inflows are Operating Profit and
Increase in share capital. Major cash outflows are Decrease in current liabilities, Purchase
of fixed assets and repayment of long-term loans and unsecured loans.
VIJAYA DAIRY
AS AT

54
Adjustments for:
Profit on Sale of Fixed Assets 1,798,976
Adjustmentsfor:
Trade and other receivables (39,862,080)

Trade Payables & Provisions (7,093,419)

ITEMS (8,389,457)

ACTIVITIES
Sale of Fixed Assets 7,318,835
Investment in Subsidiaries (23,000,000)
Profit on Sale of Investments & Other Income 723,352
VIJAYA DAIRY
AS AT
Proceeds from Long term barrowings 22,048,597
NET CASH USED IN FINANCING ACTIVITIES 61,788,453
55

(Closing balance)

Particulars Amount
45,329,0
Operating profit 42
7,318,8
Sale of Fixed Assets 35
profit on sale of investments & Other 723,3
Income 52
56
00
22,048,5
Secured loans 97
70000000
Amount in Rs.
60000000
50000000
40000000
30000000
20000000
10000000
0
Operating profit Sale of Fixed profit on sale of Increse in Share Secured loans
Assets investments & Capital
Other Income
Items
During the year cash inflows are operating profit Rs.4,53,29,042/-, sale of fixed assets
Rs. 73,18,835/-, Increase in share capital Rs.5,70,00,000/-, and increase in long term
borrowings Rs.2,20,48,597/-.

Particulars Amount
Trade & Other Receivables 39,862,080
Trade Payables & Provisions 7,093,419
Purchase of Fixed assets 31,260,897
Investment on subsidiaries 23,000,000
57
Repayment of Liabilities 17,560,144

45000000
40000000
Amount in Rs.
35000000
30000000
25000000
20000000
15000000
10000000
5000000
0
Trade & Other Inventories Trade Purchace of Investment on Repayment of
Receivables Payables & Fixedassets subsidaries Liabilities
Provisions
Items
During the year cash outflows are Increase in Trade & other receivables Rs.3,98,62,080/-,
Increase in Inventories Rs. 67,63,000/-, decrease in Trade Payables Rs.70,93,419/-,
purchase of fixed assets 3,12,60,897/-, Investment in Subsidiaries (Navabarat Fertilizers
Limited) Rs.2,30,00,000 and Repayment of loans 1,75,60,144 /-.
Interpretation: During the year 2008-09 Major cash inflows are Operating profit,
Increase in share capital and Proceeds from Long term Loans. Major Cash outflows are
Increase in current assets, Purchase of fixed assets, Investments in Subsidiaries and
repayment of loans.
VIJAYA DAIRY
AS AT
58
Adjustments for:
Profit on Sale of Investment (7,625,356)
Interest Received (346,360)
Other income (42,000)
Adjustments for:
Trade and other receivables (60,665,419)

Trade Payables & Provisions (2,125,289)

ITEMS (28,667,758)

ACTIVITIES
Investment in Subsidiaries (80,000,000)
Profit on Sale of Investments & Other Income 8,013,716
VIJAYA DAIRY
AS AT
Proceeds from Long term barrowings 71,883,646
59
Net increase in cash and cash equivalents (27,861,369)

(Closing balance)
Cash Inflow for the year 2009-10

Particulars Amount
operating profit 80,755,936
profit on sale of investments& other
income 8,013,716
Long term borrowings 71,883,646
60
Cash Inflow For the year 2009-10
90000000
80000000
Amount in Rs.
70000000
60000000
50000000
40000000
30000000
20000000
10000000
investments&
profit on sale
other income
borrowings
operating
Long term
profit
of
Items
During the year Cash inflows are Operating Profit Rs.8,07,55,936/-, Sale of Fixed assets
Rs.1,30,29,407 /-, Profit on Sale of Investments Rs.80,13,716/-, Increase in Share
Capital Rs.6,92,93,720/- and working Capital loans 7,18,83,646/-.
Cash Outflow For the year 2009-10

Particulars Amount
Trade payables & provisions 2,125,289
Purchase of fixed assets 79,567,583
Investments in Subsidiaries 80,000,000
61
Repayment of Finance 1,846,518
90000000
80000000
Amount in Rs.
70000000
60000000
50000000
40000000
30000000
20000000
10000000
0
Trade & Inventories Trade Purchase of Investments Repayment
Other payables & fixed assets in of Finance
receivables provisions Subsidaries
Items
During the year Cash outflows are Increase in Trade receivables Rs.6,06,65,419/-,
Increase in Inventories Rs.4,66,32,986/-, Purchase of fixed assets
Rs.7,95,67,583/,Investments in subsidiaries (Navabarat Fertilizers Limited) Rs
8,00,00,000/-.
Interpretation: During the year 2009-10 Major Cash inflows are Operating Profit, Sale
of Fixed assets, Profit on sale of Investments, Increase in Share Capital and working
capital loan. Major Cash outflows are Increase in Trade and other receivables, increase in
Inventories, purchase of fixed assets, Investments in subsidiaries and Repayment Long-
term loans
VIJAYA DAIRY
AS AT
Adjustments for:
62
1,45
Misc. Expenditure Written off 0
Profit on Sale of Fixed Assets -
Profit on Sale of Investment -
Interest Received -
(4,632,
Other income ,005)
Adjustments for:

(47,179,55
Inventories 2)
Trade Payables & Provisions 1,511,055
74,458,827
CASH FLOW BEFORE EXTRAORDINARY ITEMS -

Net Cash From Operating Activities 74,458,827
B .CASH FROM INVESTING ACTIVITIES

(68,052,94
Purchase of Fixed Assets 7)
Investment in Subsidiaries -
Profit on Sale of Investments & Other Income 4,632,005
Net cash used in investing activities 23,157,573
VIJAYA DAIRY
AS AT
Increase in Share Capital -
Increased in Bank barrowings 2,379,276
Loan from Directors (16,800,000)
63

(Closing balance)
Cash Inflow for the year 2010-11

Particulars Amount
operating profit 90,338,501
profit on sale of investments& other
income 4,632,005
Bank borrowings 2,379,276
64
Cash inflow for the year 2010-11
During the year Cash inflows are Operating Profit Rs. 90,338,501/-, Sale of Fixed assets
Rs. 12,119,688/-, Profit on Sale of Investments Rs. 4,632,005/-, Decrease in Bank
borrowings 2,379,276/-.
Cash Outflow For the year 2010-11
Particulars Amount
Trade payables & provisions 1,511,055
Purchase of fixed assets 68,052,947
Sale of fixed asset 12,119,688
65
During the year Cash outflows are Increase in Trade receivables Rs.29,788,823/-,
Increase in Inventories Rs. 47,179,552 /-, Purchase of fixed assets Rs. 68,052,947 /, Sale
of fixed asset
Rs 12,119,688 /-.
Interpretation: During the year 2010-11 Major Cash inflows are Operating Profit, Sale
of Fixed assets, Profit on sale of Investments, Decrease in Bank barrowings. Major Cash
outflows are Increase in Trade and other receivables, Increase in Inventories and purchase
of fixed assets, Decrease in Sale of fixed asset.
66
CHAPTER-6
FINDINGS
FINDINGS
 Major Cash outflows are relating to acquisition of Fixed Assets.
67
 The company has invested in its Subsidiary company Navabarat Fertilizers
Limited Rs 10,30,00,000/- With 100% equity.
 The Company is having Cash Credit limit With Yes Bank Limited Upto
Rs. 7,50, 00,000 to meet its day to day cash requirements.
 The company is having sustainable growth in Operating profit.
 Major cash outflows are purchase of fixed assets and Investments in subsidiaries
 Major Cash inflows are operating profit and increase in trade and other
receivables.
 During the five years non cash expenditure is Depreciation and Miscellaneous
Expenses.
 During the period the company has increased its share capital to
Rs.13,29,00,000/-
 During the period the company has positive cash flows from operating activities
 During the period the company has negative cash flows from investing activities
by Purchase of fixed assets and investments
 During the period the company has Positive cash flows from Financing activities
by increase in Share capital and Working capital loans.
 The company is having growth in its revenue sales revenue
 During the period the company did not made any credit sales
 Increase in Trade receivable in the year 2009-10 due to dues with customers
 The company has taken hypothecation loans from different banks by

hypothecation of vehicles.
68
CHAPTER-7
SUGGESTIONS
69
SUGGESTIONS
 The management has to prepare cash budget periodically to know the

requirement of the cash
 The company can take working capital loans from banks.
 The company can take Term loans from banks to acquire fixed assets and to
expand the business.
 The company has to increase revenue by increasing in sales.
 The cash credit limit with Yes bank has to increase to expand the operations of
the company.
 Sometimes there are surplus funds. it is necessary to mobilize the funds into
investing activiteies .
 The management of the company has to prepare budgeted cash statements.
 The company has to increase its cash flow from operating activities instead of
increase in share capital.
 The company has to increase in its investments.
 The company has to prepare strategy for expanding the operations.
70
BIBLOGRAPHY
PRASANNA CHANDRA FINANCIAL MANAGEMENT
Tata Mcgraw-hill Publicating Company

Fifth Edition
I.M.PANDEY FINANCIAL MANAGEMENT

Himalaya Publications
Eighth edition
M.Y.KAHAN&P.K.JAIN FINANCIAL MANAGEMENT
Tata Mcgraw-hill Publication

Company
Third Edition
R.K.SHARMA FINANACIAL MANAGEMENT

SHASI K.GUPTHA Kalyani publications
First edition
Dr.S.N.MSHESHWARI FINANACIAL MANAGEMENT

Principals and practice
Sulthan chand and sons
Seventh edition
JOURNALS FINANCIAL MANAGEMENT

BUSINESS LINE
BUSSINESS STANDARDS
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PREFACE

CASH FLOW STATMENT

Cash Flow Statement Overview

Purpose of the Cash Flow Statement

The cash flow statement is intended to provide information on a firm's liquidity or

 cash flow from operating activities

This study is going to help, in identifying the causes of satisfaction or

SUB OBJECTIVES OF THE STUDY

ANALYSIS AND REPORTING THE FINDINGS

DAIRY INDUSTRY IN ANDHRA PRADESH

The main occupation of Andhra Pradesh is Cultivation. The village reflects

The Government of Andhra Pradesh has started Dairy Development

Indian dairying is emerging as a Sunrise Industry India represents one of the

COMPETITIVE ADVANTAGES OF INDIAN DAIRY

In the emerging liberalized global scenario, trade distorting agriculture policies

REACHING OUT OF THE WORLD

VIJAYA DIARY AT A GLANCE

Name of the Organization : Vijaya Diary Limited

Nature of the business : Liquid Milk, Ghee, Butter milk

Basic raw material : Milk

Procuring the raw material : Co-operative Milk Society Boots.

Year of establishment : 1969

Plant Location : Venkateswara puram, Nellore.

Plant Capacity (per day) : 75000 Liters

Promoters : AP Milk Co-Operative Society, Hyd.

PERFORMANCE OF DAIRY IN NELLORE (DIST)

NAME OF THE CAPACITY PER PRESENT PER PEAK ON ANY DAY

Nellore Dairy 75,000 Liters 36,000 Liters 43,000 Liters

Kavali Dairy 30,000 Liters 12,000 Liters 17,000 Liters

Venkatagiri Dairy 12,000 Liters 12,000 Liters 12,000 Liters

Duttalur Dairy 22,000 Liters 22,000 Liters 22,000 Liters

The Andhra Pradesh Dairy Development Federation has got 6 product –

manufacturing units in Andhra Pradesh namely

a. Milk Products Factory, Hyderabad.

b. Milk Products Factory, Chittore.

c. Milk Products Factory, Nandyal.

d. Milk Products Factory, Proddutoor.

e. Sangam Dairy Products Factory, Vadlamudi.

f. Milk Products, Vijayawada.

name of “VIJAYA”. The products generally produced for the National

1. Skim Milk Powder.

2. White Milk Powder.

6. Ghee and White Butter.

SPEACILITIES OF VIJAYA DAIRY

1. Only milk producing company which exports its products to Malaysia.

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

5. A large Distribution Network.

marketed by the dairy.

 Skim milk powder

1. New Milk Cooling Centers are Doravarisatram and Nellorepalem:

where there is good Milk Potentiality.

capacity is established at D.V.Satram and is functioning from 21.4.2000.

Similarly one more Bulk cooling center was established at Nellorepalem

and it is functioning from 14.6.03.

2. Bulk cooling center at Adurpalli, Seethaamapuram and Rapur:

proposed one each at Adurupalli, Seethamapuram and Rapur with an

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

CONCEPT OF CASH FLOW ANALYSIS

INTRODUCTION TO CASH FLOW STATEMENTS

Cash-flow in financial analysis means net income or profit obtained after

Depreciation is not a tangible expense which is paid for by drawing a

It is frequently assumed that there will always be a cash-flow at least

CONCEPT OF CASH FLOW STATEMENT