Introduction Full

Analysis of Cash Flow Statement
CHAPTER 1
INTRODUCTION
BISHOP COTTON WOMEN’S CHRISTIAN COLLEGE Page 1

Introduction
1.1 Introduction to Cash:
Cash, like the blood stream in the human body, gives vitality and strength to a business
enterprise. Though cash hold the smallest portion of total current assets. However, Cash is
both the beginning and end of working capital cycle - cash, inventories, receivables and cash.
It is the cash, which keeps the business going. Hence, every enterprise has to hold necessary
cash for its existence. Moreover, "Steady and healthy circulation of cash throughout the entire
business operations is the basis of business solvency.
Cash refers to money in the physical form of currency, such as banknotes and coins. In book
keeping and finance, cash is current assets comprising currency or currency equivalents that
can be accessed immediately or near-immediately (as in the case of money market accounts).
Cash is seen either as a reserve for payments, in case of a structural or incidental negative
cash flow or as a way to avoid a downturn on financial markets. From an accounting
perspective, cash is the most liquid asset a company can possess. A cash balance indicates
that a company has cash on hand and can use that cash however it wishes.
Cash includes more than just the physical traditional bills and coins. Cash can include any
other currencies, as well as un deposited cheques and amounts in a current account.
Cash is the basic input needed to keep the operations of the business going on a continuing
basis; it is also the final output expected to be realized by selling the product manufactured by
the manufacturing unit. Cash is the both the beginning and the end of the business
operations.
Sometimes, it so happens that a business unit earns sufficient profit, but in spite of this it is
not able to pay its liabilities when they become due. Therefore, a business should be always

try to keep sufficient cash, neither more nor less because shortage of cash will threaten the
firms liquidity and solvency, whereas excessive cash will not be fruitful utilized, will simply
remain ideal and affect the profitability of a concern. Effective cash management, therefore,
implies a proper balancing between the two conflicting objectives of liquidity
The management of cash also assumes importance because it is difficult to predict cash
inflows and outflows accurately and there is no perfect coincidence between the inflows and
outflows of cash giving rise to either cash outflows exceeding inflows or cash inflows
exceeding outflows.
Cash flow statement is one important tool of cash management because it throws light on
cash inflows and cash outflows of a particular period.
1.2 Cash in Accounting
Cash is classified as a current asset on the balance sheet and is therefore increased on the
debit side and decreased on the credit side.
Cash will usually appear at the top of the current asset section of the balance sheet because
these items are listed in order of liquidity. Any asset that can be liquidated for cash within
one year can be included as cash, these are known as ‘cash equivalents’.
1.3 Where does Cash come from?
Cash is created from the sale of goods or services. It can also come from investors, personal
funds of directors or owners, or can be loaned from a bank. As the simplest method for
exchanging payment for goods or service, cash provides a fast, reliable, and uncomplicated
way to complete a transaction. It is also a useful asset because it retains market value over
time.

1.4 Meaning of Cash:
Cash is the most liquid asset a company can own. A company’s cash account in its chart of
accounts includes all currency and coins owned by the company as well as all deposits in the
bank including checking accounts and savings accounts. Cash also includes instruments or
contracts that can be deposited in a bank account like vendee checks, customer checks,
cashier’s checks, certified checks, as well as money orders. The cash account, like all asset
accounts, is a debit account. This means that debit or left entry in the cash account would
increase the cash account. A credit entry would do the opposite.
Accounting Example of Cash:
Cash is recorded as a current asset on the balance sheet. Even though cash can be saved for
future periods, it is still considered a current asset because it can be used in one period. Long-
term assets like vehicles cannot be completely used during one accounting period.
Since balance sheets display current and long-term assets in order of liquidity, cash is always
the first item on a balance sheet. Many times companies combine cash and cash equivalents
on the balance sheet. Since cash equivalents are closely related to cash, the true meaning of
the cash account is not distorted on the balance sheet.
1.5 Meaning of Cash Flow Statement:

Cash flow statement is concerned with the flow of cash in and out of the business. The
statement captures both the current operating results and the accompanying changes in the
balance sheet. As an analytical tool, the statement of cash flows is useful in determining the
short-term viability of a company, particularly its ability to pay bills.

Cash inflows and Cash outflows:
The concept of cash flow can be broadly divided into two categories, namely the inflow and
outflow.
The cash inflow, which is also known as inward cash flow or just cash flow, is generated as a
result of financing, ventures and sales. The cash outflow which is also known as onward flow
of cash is seen as a result of many factors such as purchases, investments, salaries and
administrative expenditures. The importance of cash flow statement was realized in the wake
of the 2007 recession cycle. Business organizations have realized the importance of cash flow
analysis, and have started regular audits of cash outflows as well as inflows. This study of
inflow and outflow tends to play a highly instrumental role on general financial
planning and management.
Ideally, during the business cycle, money flows in than flows out. This allows manager to
build up cash balances with which to plug cash flow gaps, seek expansion and reassure
lenders and investors about the health of their business.
A point to note is that income and expenditure cash flows rarely occur together, with inflows
often filling behind. The aim of this knowledge was to speed up the inflows and slow down
the outflows.
Cash Inflows key elements:
 Payment for goods or services from your customers.
 Receipt of a bank loan.
 Interest on savings and investments.
 Shareholder investments.
 Increased bank overdrafts or loans.

Cash Outflows key elements:
 Purchase of stock, raw materials or tools.
 Wages, rents and daily operating expenses.
 Purchase of fixed assets – PCs, machinery, office furniture, etc.
 Loan repayments.
 Dividend payments.
 Income tax, corporation tax, VAT and other taxes.
 Reduced overdraft facilities.
1.6 Objectives of Cash Flow Statement:

A Cash Flow statement is prepared to fulfil the following objectives.
1. To provide information on a firm's liquidity and solvency and its ability to change cash
flows in future circumstances
2. To provide additional information for evaluating changes in assets, liabilities and equity.
3. To improve the comparability of different firms' operating performance by eliminating
the effects of different accounting methods
4. To indicate the amount, timing and probability of future cash flows
1.7 Information required for the preparation of a Cash Flow Statement:
The financial data required for the successful preparation of cash flow statement are as
follows:
 Comparative Balance Sheets:
Balance Sheets at the beginning and at the end of the accounting period indicate the amount
of changes that have taken place in assets, liabilities and capital.

 Profit and Loss Account:
The profit and loss account of the current period enables to determine the amount of cash
provided by or used in operations during the accounting period after making adjustments for
non-cash, current assets and currents liabilities.
 Additional Data:
In addition to the above statements, additional data are collected to determine how cash has
been provided or used e.g. sale or purchase of assets for cash.
1.8 Types of cash flow activities:

The money coming into the business is called cash inflow, and money going out from the
business is called cash outflow.
1. Operating Activities:
There are 2 methods of preparing the Cash Flows from Operating Activities:-
1. Direct Method
2. Indirect Method
Operating activities are the principal revenue-producing activities of the enterprise and other
activities that are not investing and financing activities. It includes cash earnings plus changes
to working capital. Operating activities include cash effects of those transactions and events
that enter into the determination of net profit or loss. Operating Activities refers to cash
transactions which involve revenue receipts and expenses that affect net income.
While preparing the Cash Flow Statement as per Direct Method, Actual Cash Receipts from
Operating Revenues and Actual Cash Payments for Operating Activities are arranged and
presented in the Cash Flow Statement. The difference between Cash Receipts and Cash

Payments is the Net Cash Flow from Operating Activities under the Direct Method. In other
words, it is an Income Statement (Profit & Loss A/c) prepared on Cash Basis under the Direct
Method.
While preparing the Cash Flow Statement as per Direct Method, items like Depreciation,
Amortization of Intangible Assets, Preliminary Expenses, Debenture Discount etc. are
ignored from Cash Flow Statement since the Direct Method includes only Cash Transactions
and Non-Cash Transactions are omitted.
Likewise, no adjustment is made for Loss/Gain on the Sale of Fixed Assets and Investments
while preparing the Cash Flow Statement as per the Direct Method.
Items of cash inflow
 Cash receipts from the sale of goods and the rendering of services
 Cash receipts from royalties, fees, commissions, and other revenue
Items of cash outflow
 Cash payment to suppliers for goods and services
 Cash payments to and on behalf of employees
Cash payments or refunds of income-taxes unless they can be specifically identified with
financing and investing activities Cash receipts and payments relating to future contracts,
forward contracts, option contracts, and swap contracts when the contracts are held for
dealing or trading purposes etc.
While preparing the Cash Flow Statement the Net Profit/Loss for the period is taken as the
base and then adjustments are made for items that affected the Income Statement but did not
affect the Cash.
While preparing the Cash Flow Statement Non Cash and Non-Operating charges from the
Income Statement are added back to the Net Profits while Non-Cash & Non-Operating

Credits are deducted to calculate the Operating Profit before charging working capital.
Further, necessary adjustments are made for Increase/Decrease in current assets and current
liabilities to obtain Net Cash Flows from Operating Activities.
While preparing the Cash Flow Statement as per the Indirect Method, the Net Profit/Loss for
the period is used as the base and then adjustments are made for items that affected the
Income Statement but did not affect the Cash While preparing the Cash Flow Statement as
per the Indirect Method, Non Cash and Non-Operating charges in the Income Statement are
added back to the Net Profits while Non-Cash & Non-Operating Credits are deducted to
calculate the Operating Profit before Working Capital Changes. The Indirect Method of
preparation of Cash Flow Statement is a partial conversion of accrual basis profit to Cash
basis profit. Further, necessary adjustments are made for Increase/Decrease in Current Assets
and Current Liabilities to obtain Net Cash Flows from Operating Activities as per the Indirect
Method.
2. Cash Flows from Investing Activities :
Investing activities are the activities related to acquisition and disposal of long term asset and
other Investments which does not include cash equivalents. In other words, investing
activities include transactions and events that involve the purchase and sale of long-term
productive assets (e.g., land, building, plant and machinery, etc.) not held for re-sale and
other investments. As the cash flows represent the extent to which expenditures have been
made for intended to generate future income and cash flows, Separate disclosure of cash
flows arising from Investing Activities is important.
Items of cash inflows from investing activities:
 Cash receipts from disposal of fixed assets (including intangibles).

 Cash receipts from disposal of 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)
 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
 Cash receipts from the repayment of advances and loans made to third parties (other than
advances and loans of a financial enterprise)
 Cash receipts and payments relating to future contacts, 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.
Items of cash outflows from investing activities:
 Cash payments to acquire fixed assets
 These payments include those relating to capitalized research and development costs and
self-constructed fixed assets
 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)
 Cash advances and loans made to third parties (other than advances and loans made by a
financial enterprise)
3. Cash Flows from Financing Activities :
The activities which result in a change in the size and composition of owner’s capital and
borrowing of the organization are known as Financing Activities. The separate disclosure of

cash flows arising from financing activities is important because it is useful in predicting the
claims on future cash flows by the providers of funds.
Items of cash inflows from financing activities:
 Cash proceeds from issuing shares or other similar instruments
 Cash proceeds from issuing debentures, loans notes, bonds and other short-term
borrowing
Items of cash inflows from financing activities:
 Cash repayments of amounts borrowed
 Payment of dividend
1.9 Financial aspects or areas of Cash Flow statement:
Cash Flow has many uses in both operating a business and performing financial analysis. In
fact, it’s one of the most important metrics in all of finance and accounting.
The most common uses are:
 Net Present Value – calculating the value of a business by building a DCF Model and
calculating the net present value (NPV)
 Internal Rate of Return – determining the IRR an investor achieves for making an
investment
 Liquidity – assessing how well a company can meet its short-term financial obligations
 Cash Flow Yield – measuring how much cash a business generates per share relative to
its share price, expressed as a percentage
 Cash Flow Per Share (CFPS) – cash from operating activities divided by the number of
shares outstanding results in CFPS

 P/CF Ratio – the price of a stock divided by the CFPS (see above), sometimes used as
an alternative to the Price-Earnings or P/E ratio
 Cash Conversion Ratio – the amount of time between when a business pays for its
inventory (cost of goods sold) and receives payment from its customers is the cash
conversion ratio
 Funding Gap – a measure of the shortfall a company has to overcome (how much more
cash it needs)
 Dividend Payments – CF can be used to fund dividend payments to investors
 Capital Expenditures – CF can be used to fund reinvestment and growth in the
business.
1.10 Meaning of Cash Flow Statement Analysis:
Cash flow statement analysis is a process of reviewing and analysing a company’s cash flow
statements to understand the inflow and outflow of cash. It is also known as financial
statement that shows how changes in balance sheet accounts and income affect cash and cash
equivalents and breaks the analysis down to operating, investing, and financing activities.
The cash flow statement traces the various sources which bring in cash, such as operations,
sale of current and fixed assets, issuance of share capital and long term borrowings etc. and
the applications which cause outflow of cash, such as purchase of current and fixed assets,
redemption of debentures, preference shares for cash and so on. This statement is designed
for account for the change in cash.
Cash flow statement provides information about the cash receipts and payments of a firm for
a given period. It provides important information that compliments the profit and loss account

and balance sheet. The information about the cash-flows of a useful in providing users or
financial statements with a basis to assess the ability of the enterprise to generate cash and
cash equivalents and the needs of the enterprise to utilize these cash flows. The economic
decisions that are taken by users require an evaluation of the ability of an enterprise to
generate cash equivalents and the timing and certainty of their generation. The statement
deals with the provision of information about the historical changes in cash equivalents of an
enterprise by means of a cash flow statement, which classifies cash flows during the period
from operation investing and financing activities.
1.11 Objectives of Cash Flow Statement Analysis:

A Cash Flow statement is prepared to fulfil the following objectives.
1. To determine a project's rate of return or value.
The time of cash flows into and out of projects are used as inputs in financial models such as
internal rate of return and net present value.
2. To determine problems with a business's liquidity.
Being profitable does not necessarily mean being liquid. A company can fail because of a
shortage of cash even while profitable.
3. Act as an alternative measure of a business's profits:
As an alternative measure of a business's profits when it is believed that accrual accounting
concepts do not represent economic realities. For instance, a company may be notionally
profitable but generating little operational cash (as may be the case for a company that barters
its products rather than selling for cash).

4. To evaluate the quality of income generated by accrual accounting:
Cash flow can be used to evaluate the 'quality' of income generated by accrual accounting.
When net income is composed of large non-cash items it is considered low quality.
5. To evaluate the risks within a financial product e.g., matching cash requirements,
evaluating default risk, re-investment requirements, etc.
1.12 Utility/Usefullness of Cash Flow Statement Analysis:

The utility of cash flow statement lies in the fact that it explains the changes in cash and gives
insight to the company’s operating, investing and financial activities. Also, cash flow
statement will unveil the company’s ability to generate cash to meet its short-term
obligations, thereby assessing if company’s liquidity and solvency position is sound. Cash
flow notion is based loosely on cash flow statement accounting standards. It's flexible as it
can refer to time intervals spanning over past-future. It can refer to the total of all flows
involved or a subset of those flows. Subset terms include net cash flow, operating cash flow
and free cash flow. Cash Flow Statement is very useful to the management for short term
planning due to the following reasons:-
 Predict future cash flows:
This statement is often used as an indicator of the amount, timing and certainty of
future cash flows on the basis of what happened in the past. This approach is better
than accrual basis data presented by profit and loss account and balance sheet.
 Determine the ability to pay dividends and other commitments:
This statement indicates the sources and uses of cash under operating, investing and
financing activities, helps shareholders to know whether the business can make the

payment of amount of dividends on their investments in shares and creditors to
receive interest and principal amount in time.
 Show the relationship of net income to changes in the business cash:
Generally there is direct relation between net income and cash. I net income leads to
increase in cash and wise versa. But there may be a situation where a company’s net
income is high but decrease in cash balance and increase in cash balance when net
income is low. Every user is interested to know the reasons or difference between the
net income and net cash provided by operations. The net income generally tells the
progress of the business while cash flow relates to the liquidity of business. The uses
or helped to assess the reliability of net profit with the help of this statement.
 Efficiency in Cash Management:
This statement is very useful to the management in evaluating financial policies and
cash position. It will help the management to make the reliable cash flow projections
for the immediate future and will tell surplus or deficiency of cash so that
management may be able to make plan for investment of surplus cash or to tap the
sources where from the deficiency is to be met. Thus it is an important financial tool
for the management as it helps in the efficient cash management.
 Discloses Movement of Cash:
Previous year cash flow statement when compared with the budget of that year will
indicate as to what extent the resources of the enterprise were raised and applied.
Actual results when compared with the original forecast may highlight the trend of the
movement of cash that may otherwise remain undetected,

 Discloses Success or Failure of Cash Planning:
A Comparison of projected Cash flow Statement with the actual Cash flow Statement
will reveal the success or failure of cash planning and in case of failure, necessary
remedial steps can be taken to improve the position. It also provides better measure
for inter period and inter firm comparison.
 Evaluate Management Decision:
This statement, by providing information relating to companies investing and
financial activities, gives the investors and creditors about cash flow information
which help them evaluate management decisions.
 Enhances the Comparability of Report:
It enhance the comparability of the reporting of operating performances by different
enterprises, because it eliminates the effect of using different accounting treatments
for the same transactions and events.
1.13 Purpose & Importance of Cash Flow Statements Analysis:
 Statement of cash flows provides important insights about the liquidity and solvency
of a company which are vital for survival and growth of any organization.
 It enables analysts to use the information about historic cash flows for projections of
future cash flows of an entity on which to base their economic decisions.
 By summarizing key changes in financial position during a period, cash flow
statement serves to highlight priorities of management.
 Comparison of cash flows of different entities helps reveal the relative quality of their
earnings since cash flow information is more objective as opposed to the financial
performance reflected in income statement.

1.14 Users of Cash Flow Statement Analysis:

There are number of users of cash flow statement analysis. They are:
 Creditors:
Anyone who has lent funds to a company is interested in its ability to pay back the debt,
and so will focus on various cash flow measures.
 Investors:
Both current and prospective investors examine cash flow statements to learn about a
company’s ability to continue issuing dividends, or to generate cash flow, or to continue
growing at its historical rate.
 Management:
The company controller prepares an on-going analysis of the company’s financial results,
particularly in relation to a number of operational metrics that are not seen by outside
entities.
 Regulatory authorities:
If a company is publicly held, its financial statements such as cash flow statement are
examined by Securities and Exchange Commission to see if its statements conform to the
various accounting standards and the rules of SEC.
 Owners and Executives:
Every owner should review the company's financial statements on a monthly basis.
Shortfalls in revenues, as well as expenditures above projected budget levels, should be
addressed. That combination -- low revenues and high expenses -- can be deadly in the
long run. Department managers review their own department's P&L. Chief executives and

chief operating officers review the P&L for each department as well as the company P&L
and balance sheet.
1.15 Methods of Cash Flow Statement Analysis:
Operating activities are the main source of revenues and expenditures, thereby cash flow
from the same needs to be ascertained. The cash flow can be reported through two ways:
Direct method that discloses the major classes of gross cash receipts and cash payments and
Indirect method that has the net profit or loss adjusted for effects of transactions of a non-
cash nature, any deferrals or accruals of past/future operating cash receipts and items of
income or expenses associated with investing or financing cash flows.
1. Direct method:
In the direct method, the major heads of cash inflows and outflows (such as cash received
from trade receivables, employee benefits, expenses paid, etc.) are to be considered. As the
different line items are recorded on accrual basis in statement of profit and loss, certain
adjustments are to be made to convert them into cash basis such as the following:
 Cash receipts from customers = Revenue from operations + Trade receivables in the
beginning – Trade receivables in the end.
 Cash payments to suppliers = Purchases + Trade Payables in the beginning – Trade
Payables in the end.
 Purchases = Cost of Revenue from Operations – Opening Inventory + Closing
Inventory.
 Cash expenses = Expenses on accrual basis + Prepaid expenses in the beginning and
Outstanding expenses in the end – Prepaid expenses in the end and Outstanding
expenses in the beginning.

2. Indirect method:
Indirect method of ascertaining cash flow from operating activities begins with the amount of
net profit/loss. This is so because statement of profit and loss incorporates the effects of all
operating activities of an enterprise. However, Statement of Profit and Loss is prepared on
accrual basis (and not on cash basis). Moreover, it also includes certain non-operating items
such as interest paid, profit/loss on sale of fixed assets, etc.) And non-cash items (such as
depreciation, goodwill to be written-off, etc. Therefore, it becomes necessary to adjust the
amount of net profit/loss as shown by Statement of Profit and Loss for arriving at cash flows
from operating activities.
There are several general categories of ratios each designed to examine a different aspect of a
company’s performance. The general group of ratios are:
 Operating Cash Flow Ratio:
The operating cash flow ratio is one of the most important cash flow ratios. Cash flow is an
indication of how money moves into and out of the company and how the company pays its
bills. Operating cash flow considers cash flows that a company accrues from operations as
related to its current debt. It measures how liquid a firm is in the short run since it shows
whether or not cash flows from operations can cover its liabilities.
Operating Cash Flows Ratio = Cash Flows from Operations/Current Liabilities
 Price/Cash Flow Ratio:
The price to cash flow ratio is often considered a better indication of a company's value than
the price to earnings ratio. It is a really useful ratio for a company to know, particularly if the

company is publicly traded. It compares the company's share price to the cash flow the
company generates on a per share basis. The price/cash flow ratio is calculated as follows:
Price/cash flow ratio = Share price/Operating cash flow per share
 Cash Flow Margin Ratio:
The Cash Flow Margin ratio is an important ratio as it expresses the relationship between
cash generated from operations and sales. The company needs cash to pay dividends,
suppliers, service its debt, and invest in new capital assets, so cash is just as important as
profit to a business firm. The Cash Flow Margin ratio measures the ability of a firm to
translate sales into cash. The cash flow margin ratio is calculated as follows:
Cash flow margin ratio = Cash flow from operating cash flows/Net sales
 Cash Flow to Current Liabilities ratio:
Cash Flow to Current Liabilities measures the amount of operating cash flow a firm generates
on each dollar of current liabilities that it utilizes to finance operations. A low Cash Flow to
Current Liabilities indicates that a company is not converting sales into cash flow at a rate
that can cover short-term operating liabilities and will likely require external funding to
resolve shortfalls.
Cash Flow to Current Liabilities = Cash from Operations ÷ Average Current Liabilities

 Current Ratio:
The current ratio is the most simple of the cash flow ratios. It tells the business owner if
current assets are sufficient to meet the company's current debt. The ratio is calculated as
follows:
Current Ratio = Current Assets ÷ Current Liabilities
 Quick Ratio (Acid-Test):
The quick ratio, or acid test, is a more specific test of liquidity than the current ratio. It takes
inventory out of the equation and measures the firm's liquidity if it doesn't have inventory to
sell to meet its short-term debt obligations. If the quick ratio is less than 1.0 times, then it has
to sell inventory to meet short-term debt, which is not a good position for the firm to be in.
Quick Ratio = Current Assets - Inventory/Current Liabilities
 Asset Efficiency ratio:
The Asset Efficiency ratio is similar to the Asset Turnover ratio. While the Asset Turnover
ratio measures the dollars in sales that a firm can generate from its assets; the Asset
Efficiency ratio measures the amount of cash flow that a company generates from its assets.
Asset Efficiency = Cash from Operations ÷ Average Total Assets
 Short-Term Debt Coverage ratio:
Short-Term Debt Coverage measures the amount of cash flow a firm generates for each dollar
of short-term debt it uses. Even the fastest growing firms can experience financial stress if
they don't generate the cash flow required to pay o short-term debt.

Short-Term Debt Coverage = Cash from Operations ÷ Short-Term Debt
 Dividend Coverage ratio:
Dividend Coverage measures the cash cushion available to management to maintain the
firm's dividend to common shareholders. Since cuts in dividend payments are typically not
well received by the market, monitoring the dividend coverage ratio for declines can serve as
a leading indicator for investors that a cut may be coming on the horizon.
Dividend Coverage = Cash from Operations ÷ Cash Dividends
 Dividend Pay-out Ratio:
Dividend Pay-out Ratio measures the percentage of net income a firm is paying out to
shareholders versus retaining for reinvestment in the business. A high or negative pay-out
ratio indicates that the firm's current dividend is unsustainable in the long- term.
Dividend Pay-out Ratio = Cash Dividends ÷ Net Income
 Cash Ratio:
The cash ratio, sometimes referred to as the cash asset ratio, is a liquidity metric that
indicates a company’s capacity to pay o short-term debt obligations with its cash and cash
equivalents.
Cash Ratio = Cash and Cash Equivalents ÷ Current Liabilities

1.16 Functions of Cash Flow Statement Analysis:
Cash flow analysis gives structural relationships of the various items in the cash flow
statement. The main functions which are used in the process of analysis and interpretation
are:
1. Rearrangement of cash flow statements:
For analysis, it is necessary to reclassify the data contained in the financial statement into
purposive classes so that maximum information from data for analysis can be obtained.
Reclassification and rearrangement of different data depend upon the purpose of analysis.
2. Comparison:
After the classification of data of cash flow statement into different categories, it is necessary
to derive comparative data of the same enterprise of the past periods if it is a time series
analysis. In case of cross-sectional analysis, it is necessary to derive comparative data of the
same accounting period of similar comparable enterprises. For this a comparative study is
necessary.
3. Analysis:
Comparative cash flow data are then analysed with reference to financial characteristics like
profitability, solvency, and liquidity.
4. Interpretation:
The concluding part of cash flow statement analysis is interpretation of cash flow information
generated in the process of cash flow statement analysis. The interpretation should be precise
and directed towards indicating the movement of various financial characteristics.

1.17 Advantages of Cash Flow Statement Analysis:

The various advantages of cash flow statement analysis are as follows:
1. Disclose the Inward and Outward Movement:

The primary function carried out by a cash flow statement is to disclose the inward and
outward movement i.e. inflow and outflow of cash. It indicates all possible changes in cash
position of a firm in quantitative terms accompanied by the reasons to support such changes.
Hence, a cash management can exercise full control over cash movement with the help of
cash flow statement.
2. It plays a vital role in short-term financial planning:

It helps in forecasting cash requirements, determining the quantity of required cash in
advance, the amount that can be generated form internal sources and the volume expected to
be acquired from outside sources. Thus, the future course of action related to cash can be
planned in the light of cash flow statement.
3. Help to Management in Formulating Policies Related to Internal Financial

Management:
Aids Internal Financial Management Cash flow statement is of great help to management in
formulating policies related to internal financial management. Since, any information
pertaining to the availability of cash from operations can be obtained by means of cash flow
statement. Thus, a management can make important decisions involving dividend policy,
replacement of assets, repayment of long-term loans etc.
4. Reveals Success or Failure of Cash Planning:

It reveals the extent of success or failure of cash planning. As a management may hold
comparison of cash flow of current year with projected cash budget of that period, variations,
if any with relevant cause may be detected and necessary remedial actions can be initiated.

5. Adds Efficiency to Cash Management:

Cash is the very foundation of all business operations. Therefore, a projected cash flow
statement provides sufficient guidelines to the management for planning and coordinating
financial operations properly, effectively and efficiently.
6. Helps to determine the likely flow of cash:

Projected cash flow statements help the management to determine the likely inflow or out
flow of cash from operations and the amount of cash required to be raised from other sources
to meet the future needs of the business.
7. Supplemental to funds flow statement:

Cash flow analysis supplements the analysis provided by funds flow statement, as cash is a
part of the working capital.
8. Better tool of analysis :

For payment of liabilities, which are likely to be matured in the near future, cash is more
important than the working capital. As such, cash flow statement is certainly a better tool of
analysis than funds flow statement for short-term analysis.
1.18 Limitation of Cash Flow Statement:
Cash flow statement is an important analytical tool. Yet, it is advised to employ this
technique with care and precautions for the purpose of analysis due to the limitations attached
to it. These limitations are as follows–
1. Cash flow statement does not measure the economic efficiency:

Usually a company with heavy capital investment will have more cash inflow. Therefore,
inter-industry comparison of cash flow statement may be misleading. Therefore Cash flow
statement does not measure the economic efficiency of one company in relation to another.

2. Misleading comparison over a period of time:

Just because the company's cash flow has increased in the current year, a company may not
be better off than the previous year. Thus, the comparison over a period can be misleading.
3. Misleading inter-firm comparison:

The terms of purchases and sales will differ from firm to firm; Moreover, cash inflow does
not always mean profit. Therefore, inter-firm comparison of cash flows may also be
misleading.
4. Influenced by changes in management policies:

The ash balance as disclosed by the cash flow statement may to represent the real liquidity
position of the business. The cash can be easily influenced by purchases and sales policies, by
making certain advance payments or by postponing certain payments.
5. Cannot be equated with income statements:

Cash flow statement cannot be equated with the income Statement. An income statement
takes into account both cash as well as non-cash items. Hence ne: cash flow does not
necessarily mean net income of the business.
6. Not a replacement of other statements:

Cash flow statement is only a supplement of funds flow statement and cannot replace the
income statement or the funds flow statement as each one has its own function or purpose of
preparation.
7. Net cash flow does not necessarily imply the net income of the business:
As unlike income statement, cash flow statement takes into account only cash discarding non-
cash items from its preview. Cash flow statement no doubt depicts the cash position but the
cash balance shown by cash flow statement may not be the true representative of real liquid
position of the business and it can be easily influenced by postponing purchase and other
payments.

Despite the drawbacks, of cash flow statement, it is a useful supplementary accounting

instrument serving as a barometer in evaluating profitability and financial position of an
enterprise.

CHAPTER 2
REVIEW OF LITERATURE

2.1 Meaning of Review of Literature:
A literature review is an evaluative report of studies found in the literature related to your
selected area. The review should describe, summarize, evaluate and clarify this literature. It
should give a theoretical basis for the research and help you determine the nature of your own
research.
A literature review is a scholarly paper, which includes the current knowledge including
substantive findings, as well as theoretical and methodological contributions to a particular
topic. Literature reviews are secondary sources, and do not report new or original
experimental work.
2.2 Review of Literature:
1. Aghdas Jafari Motlagh, (2013):

According to him in his study about how statement of cash flow is prepared and how
it is differentiated from fund flow statement. They make use of secondary data
collected from various websites, journals, etc. The study concluded that funds flow
statement is not much useful in short term financial planning like cash flow statement
because the cash is more important to execute the plan in short run as compared to
working capital.
2. Thomas Zeeker and Brian Stanko, (1990's)

This study is based on retail sellers and analysed whether the cash flow ratio is useful
for the financial ratio analysis. With the help of primary data they found that the cash
flow statement for retail sellers is useful to find out the financial ratios. Apart from
this they also found that in order to assess the economic status or financial position of
retail firm not only accrual basis of accounting but also the new and traditional
accounting methods should be implemented.

3. Ajay Paliwal, Mukesh Ahirrao and Rana, (2015):

According to them, to analyse the financial performance of a firm cash flow statement
is an important tool and the cash flow changes can be identified only by making
comparison of the financial position of a firm for at least two years. The study found
the net changes in cash and its distribution in financing, investing, and operating
activities which helps to measure strength and weakness in cash flow statement.
4. Jeffrey Hales and Steven Orpurt, (2013) :

The study is on significance of direct method and indirect method of cash flow
statement to financial statement users. They concluded that the direct method
information is economically significant and that the recurring benefits that many firms
derive from providing direct method information likely exceed recurring cost.
5. Finger (1994):
Conducted a study to test a firm’s specific predictive ability for future cash flow over
the entire time period by using a time series model. For this Annual data for the 50
sample firms starting from the year 1935 to 1987 was obtained from Compustat
annual industrial file from 1968 to 1987 and supplemented with hand gathered Annual
Report information from 1935 to 1967. Those firms were members of the 1988
fortune 500. Cash flows from operations were approximated by adjusting income
before extraordinary items for depreciation, deferred taxes, changes in non-cash
current assets, and changes in current liabilities excluding current maturities of long
term debt. Earnings were represented by net income before the spending on some
extraordinary items.
He concluded that earnings used either alone or together with cash flow, were an
important predictor of future cash flows. However, the results revealed that current
cash flows were a superior predictor of future cash flows compared with current
earnings for short term prediction.

6. Plewa and friedlod (1995):
Analysed that the cash flow prediction can help companies to know about cash
position and make its expenditures needs accordingly such as for acquisitions and
payment of expenses. Therefore, difference between future cash flow and actual cash
flow is necessary for analysing, understanding and measuring a firm’s performance.
7. Cheung, Krishnan, and Min (1997) :
Aims to study the relationship between deferred income tax and future operating cash
flows and tax payment. Investigate the incremental information of deferred income
tax; first, they tested the ability of deferred tax to predict future tax payment, and
predicted future operating cash flows. They examined the predictive ability by adding
the deferred tax variable into model. In their study, operating cash flows are an
independent variable, and were calculated by operating income before depreciation,
minus interest expense, current portion of income tax expense and increase in net
working capital other than cash and securities, net of short-term debt. This test
showed that the addition of the deferred tax variable improves the prediction of future
cash flow. In particular, it is more useful if companies have large amounts of deferred
tax.
8. Wallace, Choudhury and Pendledury (1997) :
Analysed that the use of the cash flow for any enterprises derived from investing
activities and also the settlement of outstanding financial obligations in a financial
period is from internal and external resources. Internal sources are derived from net

cash generated from current operations. External sources come out from financing
activity such as borrowing and receiving cash from sale activities and equity shares.
9. Dyna Seng (1997) :
In the study they examined the predictive ability of earnings and reported cash flow
measures CFFO, Cash Flow from Investing Activities (CFFIA), and Cash Flow from
Financing Activities (CFFFA) to forecast one and two-period ahead cash flows during
the period 1989-92, The degree of relationship between earnings and cash flow
measures is also examined as a secondary goal of the study. The results provide
evidence that CFFO, CFFIA is a better predictor of one- and two-period ahead CFFO;
CFFIA than is earnings and CFFFA is a better predictor of two-period ahead CFFFA
than is earnings. Whereas, my study focuses on ability cash flow from operation
activity as predictor on future cash flow and not mention about CFFIA and CFFFA.
10.Patricia M. Dechow and et. al (1997)
Made an attempt to examine a simple model of earnings, cash flows and accruals is
developed by assuming a random walk sales process, variable and fixed costs,
accounts receivable and payable, and inventory and applying the accounting process.
The model implies earnings better predict future operating cash flows than the current
operating cash flows and the difference varies with the operating cash cycle. Also, the
model is used to predict serial and cross correlations of each firm's series.

11.Wang and Eichenseher (1998)
They analysed earnings under accounting could themselves suffer from timing and
matching problems that may contribute to errors in assessment of a firm s value In
some cases, accruals may include poorly estimated receivable collections,
depreciation, equity method income that does not approximate market changes, and
current recognition of previous periods, increases in market value.
As a result, under these circumstances accrual earning may be less effective in their
ability to predict future cash flows, and users of accounting information turn to
consider cash flow instead.
12.Mossman et al (1998) :
They have found that the relative usefulness of cash flow versus accrual data in
providing information to decision makers has been examined in many contexts, such
as relevance to stock prices, insolvency and bankruptcy. It suggested that cash flows
can be used as an early warning of potential financial distress.
13.Lee, Ingram and Howard (1999)
Conducted a study on the difference between earnings and cash flow from operations.
It can be used as an important signal of potentially fraudulent financial reporting those
auditors and other analysts should consider, in addition to other factors such as
leverage, retained earnings and market value. The excess of earning over cash flows
indicates the fraud risk in the coming years. This is because the fraudulent firms often
have poor financial performance but they conceal their performance by overstating
earning.

14.Brighm and Gappenski (1999):
found out in internal capital investment, capital budget analysis also involves cash
flow prediction. The capital investment deals with investment projects such as new
product, replacement of existing asset, or expansion of product lines. The projects can
be evaluated by various methods including net present value NPV and Internal Rate
of Return, (IRR).
15.Dana Aollie (1999):
Provided evidence that A) cash flow components reflect different information related
to future cash flow B) The disaggregation of cash flow components has the potential
to enhance prediction model performance. He finds that other factors of cash flow
such as sales, cost of goods sold, operating expense, and interest have similar
persistence in predicting future cash flows. He clears that cash flow components and
accrual components complement each other in explaining future cash flow. His
findings are usually from several perspectives, and his results provide a benchmark
for the importance of the details of cash flow in predicting future cash flows. His
finding also provide a basis for policy makers in evaluating the reporting of line
items for operating cash flow, and his findings are based on estimation, it include
special items and may still include core cash flow components.
16.John Wileyand Sons (2000)
Discovered operating activities in every company are the main activities and include
revenue producing and other activities that are not investing and financing activities.
Investing activities include the acquisition and disposal of long term assets and other

investment except short term investments. Financing activities constitute changing of
result in the size and composition of the equity capital and the borrowing of the
enterprises.
The accrual accounting is a basic accounting assumption dealing with the accounting
process of recognizing the effects of financial transactions in the period in which
events occur, rather than focusing only on cash receipts or payment.
17.Gallinger (2000):
Evaluated, cash flow from operations activity can be evaluating the quality of profits
on income statements. The difference between net cash flow from operation and net
profit is the helpful in interpreting the quality of earning. A large difference between
net profits and cash flow from operation will reflect a low quality of profits- perhaps
net income has increased without an increase in cash flows from operations. This may
result from increases in sales on credit, causing increases in accounting receivable,
indicating that the company may have a cash collection problem in the future.
18.Boyd and Cortese Danile (2000)
In their study they reported cash flow from operations is often seen as the most
important category among the three categories because it results from the main
income producing activity. Cash generated from the operating activity provides an
indication of the company to produce cash from its main activity. The company must
generate sufficient cash from its operating activities to finance its daily activities
(Boyd and Cortese- Danile 2000- 2001). Moreover cash flow from operations
primarily supports capital expenditures and dividends (Grossmanand Pearl 1988).

If the company cannot generate any cash to repay loan, pay dividend or make new
investment, the company would lend cash from external sources, causing future cash
flows.
19.Lee and Leibman at el (2000):
Conducted the study by using cash flow from operations to calculate free cash flow.
Free cash flow is money earned from operations after giving provision for capital
expenditure at the end of an accounting period. It is basically defined as net cash flow
from operation activity, less capital expenditures and dividend on preferred stock. It
shows the ability of the company to generate cash from its operations after spending
money on the expenditure.
20.Henderson and Peirson (2000):
In their study they reported the accrual concept recognizes assets, liabilities, revenues
and expenses to record the trade transactions, including cash and credit transactions.
An asset refers to a resource that belongs to the company as a result of past financial
transactions IASC (2000). Assets represent future benefits including cash that is
expected in the future. They can be divided into two categories according to their
longevity, current and noncurrent assets. In addition to cash, current assets include
accounts receivable, inventories, prepayments and other assets that will be converted
into cash within twelve months of the reporting date. In contrast, noncurrent assets
refer to assets that will not be converted into cash within next twelve months after the
end of the financial year, such as land and buildings, plant and equipment and
intangible assets, including goodwill.

21.Kimmel, Weygant and Kieso (2000) :
Concluded that cash flow statement is an important and necessary principle of perfect
financial reporting by national and international accounting standard board, because
financial statement users note that the balance sheet, income statement and retained
earnings statement do not always show the whole financial condition of a company.
22.Zwaig and Pickett (2001):
Predicted that creditors, lending decision, predicting bankruptcy problems of a
customer can prevent losses due to bad debts. There are a number of early warning
signs indicating that a company is experiencing financial distress. Cash flow is an
important financial indicator of a financial problem.

CHAPTER 3
RESEARCH DESIGN

RESEARCH DESIGN
3.1 Title of the project:
A study on analysis of cash flow statement with reference to future retail limited.
3.2 Statement of problem:
The study is on understanding how a company’s operating, investing, and financing
activities has impacted increase and decrease in cash during different accounting period.
3.3 Scope of the study:
The scope of the study is to find out the ability of the firm to generate cash and cash
equivalents by using historical cash flow information as an indicator for the amount,
timing, and certainty of future cash flows.
 The study provides information regarding cash generated and used in operating,
investing, and financing activities.
 The study explains the causes for changes in cash balance during different
accounting periods.
 The study is limited to only future retail limited products.
3.4 Objectives of the study:
1. To determine the inflow and outflow of cash for different accounting period.
2. To understand the liquidity and solvency position of the firm.
3. To evaluate future cash flows with the help of historical data.
4. To assess the ability of the firm to pay its obligation as soon as it becomes due.

3.5 Research methodology
 Sample design: the sample design used for the study is Random Sampling.
 Sample plan: the size of the sample was limited only to the staff members of the
accounts department of Future Retail Limited.
 Tools for data collection: The tool for the study is the Cash Flow Statements of
Future Retail Limited.
 Plan of analysis: Data gathered from annual reports and other sources will be
represented in the form of meaningful tables and graphs.
3.6 Sources of data:
The study will be conducted with reference to the data related to future retail limited
Products.
The study is purely based on secondary data. The data required is collected through:-
 Cash flow statements given by the company.
 Data ascertained by journals, company’s website, news, and reports on the trends of
cash flow statement analysis.
3.7 Limitations of the study:
 The study is restricted to Future Retail Limited only
 Time was a constraint.
 The analysis is limited to 3 years Cash Flow performance of the company.

Reference Period:
This period covers three financial years that is:
 2015-16
 2016-17
 2018-19
Chapter Scheme:
Chapter 1: Introduction
This chapter includes information about cash, Meaning of Cash Flow Statement, Objectives
of Cash Flow Statement, Information required for the preparation of a Cash Flow Statement,
Types of cash flow activities, Financial aspects or areas of Cash Flow statement, Purpose &
Importance of Cash Flow Statements Analysis, Users of Cash Flow Statement Analysis,
Methods of Cash Flow Statement Analysis, cash flow ratios, Main functions of Cash Flow
Statement Analysis, Advantages of Cash Flow Statement Analysis, Limitation of Cash Flow
Statement.
Chapter 2: Review of Literature
Meaning and 22 reviews
Chapter 3: Research Design
Title of the project, Statement of problem, Scope of the study, Objectives of the study,
Research methodology, Sources of data, Limitations the study.

Chapter 3: Company Profile

Chapter 4
Company Profile

4. INDUSTRY PROFILE AND COMPANY PROFILE
4.1 Industry Profile
Industry refers to the production of an economic goods or service within an economy.
Industry in simple is any activity by which you either create material, alter material to create
something else, or move materials around. Also, anything involving the usage of blueprints in
anyway is defined as an industrial activity. Key activities defined as industrial are: mining,
refining, planetary interaction, hauling, research and development, and manufacturing. Each
of these activities is complicated in and of it, and contains their own sub-activities.
Service Industry:
The service industries involve in the provision of services to businesses as well as final
consumers. Such therefore includes accounting, tradesman ship (like mechanic or plumber
services), computer services, restaurant, tourism, etc.
Service industries include everything else: banking, insurance, transportation,
communication, wholesale and retail trade, all professional services such as engineering and
medicine, all consumer services and government services.
Retail Industry:
Retail industry is one of the components of service industry. The contracting global economy,
advances in technology, a proliferation in the number of shopping channels, and an
increasingly well-informed and mobile consumer base are altering the means, modes, and
manner in which consumers shop.

4.2 History And Evolution Of Retail Industry:
India retail industry is the largest industry in India, with an employment of around 8% and
contributing to over 10% of the country's GDP. Retail industry in India is expected to rise
25% yearly being driven by strong income growth, changing lifestyles, and favourable
demographic patterns.
It is expected that by 2016 modern retail industry in India will be worth US$ 175- 200 billion.
India retail industry is one of the fastest growing industries with revenue expected in 2007 to
amount US$ 320 billion and is increasing at a rate of 5% yearly. A further increase of 7-8% is
expected in the industry of retail in India by growth in consumerism in urban areas, rising
incomes, and a steep rise in rural consumption. It has further been predicted that the retailing
industry in India will amount to US$ 22.5 billion by 2015 from the current size of US$ 18.5
billion. Shopping in India has witnessed a revolution with the change in the consumer buying
behaviour and the whole format of shopping also altering. Industry of retail in India which
has become modern can be seen from the fact that there are multi- stored malls, huge
shopping centres, and sprawling complexes which offer food, shopping, and entertainment all
under the same roof.
India retail industry is expanding itself most aggressively; as a result a great demand for real
estate is being created. Indian retailers preferred means of expansion is to expand to other
regions and to increase the number of their outlets in a city. It is expected that by 2015, India
may have 600 new shopping centres.
In the Indian retailing industry, food is the most dominating sector and is growing at a rate of
9% annually. The branded food industry is trying to enter the India retail industry and convert
Indian consumers to branded food. Since at present 60% of the Indian grocery basket consists
of non- branded items.
India retail industry is progressing well and for this to continue retailers as well as the Indian
government will have to make a combined effort.

4.3 Retail Formats In India:
EMERGING
MORDERN
ESTABLISHED KIOSKS
CONVINIENCE
TRADITIONAL KIOSK STORES
KIRANA SHOPS DEPARTMENTal
STORES
ITENEREANT INDEPENDENT
SALESMAN STORES CHAIN STORES
HATS CO-OPERATIVE FRANCHISE
SPECIALITY
STORES
SHOPPING
MALL/PLAZA
Formats of Retailing
1. Traditional Formats :
 Itinerant Salesman: It is a type of direct selling, which stated centuries ago. It is
an example of door-to-door office-to-office delivery or marketing. Morning milk man
and sabji wala are the most famous examples of this category. This type of format has
been very popular throughout India in coping with daily needs. In rural areas this
sales man use cycles, for carrying their stock for display of Goods.
 HAATS: Haats are the unique examples of traditional malls in India. Just like
Malls, different seller’s sells different types of items along with the sale of vegetables,
fruits, sweets, chart etc. Some entertainment arrangements are also made in available
in these haats. There was tendency in rural as well as semi-urban area in India for

visiting these haats with family members as a part of picnic cum purchasing
programs. In fact Haats are periodic markets (generally organized once in week or
fortnight at a particular place & time) that form a major part of the rural market
system in India. In other words the term Haats refers to locations, which witness a
public gathering of buyers and sellers at fixed time, and fixed locations. On account
of organization of these haats these are called with the name of a particular day also
such as Mangal Bazaar, Budh Bazaar etc. According to one estimate about 42,000
haats are organized in our country.
 Melas: Melas are fairs & they can range from commodities fairs to religious fairs.
Virtually every state in India has meals for which it is known. It is estimated that more
than 2500 melas are held annually in the country. It is also estimated that the average
outlets in every Mela would be more than 800 & the average sale per mela would be Rs.
143 lakhs. Nauchandi is an example of important annual mela in Meerut, at many places
such as Gwalior, Aligarh, Bulendshahr annual exhibitions are organized. At government
level, a number of fairs such as book fair, trade fair and specific commodity fair are
organized by Trade Fair Authority of India
2. Established Formats:
 Kiosks: A kiosk is a small freestanding pavilion or stall often open on one or more
sides and used for information sales and promotion. Generally a kiosk is placed in a
shopping centre, a bus stand or near by the prospective customers.
 Kirana shop & Independent Stores: This is one of the important & popular
established formats of retailing in India. These shops are usually shops with a very
small area, stocking a limited range of products, varying from region to region
according to the need of the clientele or the whims of the owners.
 Super Markets/Hyper Markets: These are large (90,000 square feet plus) self-
service stores selling a variety of products at discounted price. The best practice
chains in this format are Carrefour (France) Wal-Mart (US). Supermarkets tend to be
located in key residential markets and malls and offer competitive prices due to
economics of scale in logistics and purchasing. The format is new to India and some

important players in this field are Food World, Big Bazaar. Indian Super Market are
smaller than others countries.
 Departmental Stores: These large stores primarily sell non-food items such as
apparel, footwear household products. They stock multiple brands across product
categories, though some of them focus as their own store labels. Departmental stores
are found on high streets and as anchor shops of shopping malls. Some department
stores chains are opened in India e.g. Shopper’s stop, Westside and Ebony.
 Specialty Chains: These outlets focus on a particular brand as product category,
usually non-food items and are located on high streets and in shopping malls. The
most famous specialty chains include Gap, Levi’s and Benetton.
 Discount Store: It is a general merchandise retailer that offers a wide variety of
merchandises limited service and low prices. Subhiksha and Margin free markets are
operating in this format in India.
 Wholesale Cash And Carry: The wholesale cash and carry operation is defined
as any trading outlets where goods are sold at the wholesale rate for retailers and
business to buy. The transactions are only for the business purpose and not for
personal consumption. Metro, cash and carry, Gmbh of Germany entered the India in
this format.
 Convenience store: It is a retail business of less than 5,000 square feet with
primary emphasis on providing the public a convenient location to quickly purchase
an assortment of food, gasoline and other consumable products. They are usually
open seven days a week for extended hours
3. Co-Operative Shops/Govt. Organisation:
Cooperative stores in India are the result of the cooperative movement that can be traced to
the Pre-independence period. They emerged as a reaction to the feudal system & attempted to
place the fruit of labour in the hands of the producer himself to make him relevant. The
Cooperative movement was strengthened after independent in Western India?
A consumer cooperative is a retail institution owned by member customers. A consumer

cooperative is generally formed either because of dissatisfied consumers who's needs are not

fulfilled by the existing retailers or on account of initiative by enlightened consumer.
4. Mother Dairy, Delhi & Fruit & Vegetable Project, Delhi :
Mother Dairy, Delhi & the fruit & vegetable project Delhi, set up by the National Dairy
Development Board in 1974, 1986, respectively, were merged to form Mother Dairy Fruit &
Vegetable Limited in April 2000.
The new Company, a wholly owned subsidiary of NDDB, is involved in marketing &
distribution of milk, milk products & horticulture produce. The companies’ dairy plant
handles more than 1.3 million litres of milk daily & undertakes its marketing operations
through 636 own milk shops & more than 6500 retail outlets in and around Delhi. Ice-creams
market
5. PDS/Fair Price Shop :
The PDS or Public Distribution System would easily emerge as the single largest retail chain
existing in the country. The evolution of PDS of Grains in India has its origin in the rationing
system introduce by the British during World War II. The system was started in 1939 in
Bombay & Subsequently extended to other cities and towns. By the year 1946, as many as
771 cities/towns were covered. The system was abolished post war, however, on at attaining
Independence India was forced to reintroduce it in 1950 in the face of renewed inflationary
pressures in the economy.
6. Convenience Shops :
These shops are relatively small shops that are located near residential areas, are open for
long house & 7 days a week and offer a limited line of convenience products like beverages,
ready to eat snack (Pastry, Sandwiches) bread, eggs, milk, confectionary etc. These shops
have been quite common throughout the country.

7. Specialty Shops :
A Specialty shop is a retail shop displaying merchandise, which has narrow product line,
specializing in a particular type of merchandise & offering, and specialized service to
customers. Generally these shops concentrate on a specific item such as Appeal, Jewellery,
Fabric, Sporting Goods, and Furniture etc. Specialty shop can be sub classified by the degree
of narrowness in their product line. E.g. a clothing stock would be a single line shop, a men’s
clothing shop would be limited time shop & a men’s shirt store would be a super specialty
shop. Such shop have always played significant role in relating of consumer durables
throughout the country but particularly in urban & sub-urban areas.
8. Rural Malls Have Made A Beginning:
Rural retailing is an important segment of the retail industry and it is only lately that
companies are making investments in this area. ITC launched Chaupal Sagar, the first rural
mall, with a variety of products and offering farmer’s tools to adapt to new technologies and
methods of farming and selling their produce. The DCM Sriram Group has opened a Hariyali
Bazaar, offering farm-related services and plans to increase their product line to a full-fledged
grocery store. Godrej Group has opened Adhaar, a one-stop shop for farmers, focusing on
farm related products. Escorts and Tata Chemicals are also in the process of setting up agri-
stores targeting the rural market
9. Hypermarkets:
In commerce, a hypermarket is a superstore combining a supermarket and a department store.

The result is an expansive retail facility carrying a wide range of products under one roof,
including full groceries lines and general merchandise. In theory, hypermarkets allow
customers to satisfy all their routine shopping needs in one trip.

4.4 COMPANY PROFILE
Type Private
Industry Retailing, Insurance, Logistics, Media
Founder Kishore Biyani (CEO)
Headquarters Mumbai, Maharashtra, India
Products Integrated foods and other FMCGs
Services Supermarkets, Hypermarkets, Discount
Stores, Insurance, Logistics, Media
Net Income ₹200.6018 billion(US$2.8 billion) as of March
2013
Number of employees 456920
Divisions Future Retail Limited.
(BSE: 523574,NSE: FRL), Future Lifestyle

Fashion Limited., Future Consumer
Enterprise Limited., Future Innoversity
Limited., Future Supply Chains Limited.,
Future Brands Limited., Future Capital
Holdings Limited.
Website www.futuregroup.in
www.futurebazaar.com

Introduction:
Future Retail Limited is an India-based company, which is engaged in the business of
retailing a range of household and consumer products through departmental store facilities
under various formats. The company is primarily engaged in the business of multi-brand
retail trade. The company has access to approximately 20 compact hypermarket easy day
stores and over 210 supermarket easy day stores. Its retail formats primarily consists of value
business and home business. In its value business, the company formats include Big Bazaar, a
hypermarket format; Food Bazaar, a supermarket; FBB, a fashion destination; Foodhall, a
supermarket, and easyday convenient stores. In its home business, the company operates
Home Town, a one-shop destination for home improvement, and eZone, a consumer durable
and electronics chain.
Future Group offers innovative offerings at affordable prices tailored to the needs of every
Indian household.
 Pioneers in the India’s retail space, Future Group's formats are household names in
more than 93 cities and 60 rural locations across the country

 Future Group's stores cover around 17 million square feet of retail space and attract
around 300 million customers each year
 Pantaloon Retail (India) Limited focuses on the lifestyle retail segment led by the
Pantaloons and Central formats
 Future Value Retail focuses on the value retail segment through the Big Bazaar, Food
Bazaar and KB’s Fair price formats.
BRANDS KNOWLEDGE SERVICES RETAIL

SHOPPING MALLS
E-TAILING
LEISURE CAPITAL
FUTURE
&
GROUP
ENTERTAINMENT
CONSUMER FINANCE INSURANCE
LEARNING
&
DEVELOPMENT MEDIA VENTURES LOGISTICS

4.5 History Of Future Group:
 1987:
The company is incorporated under the name of Manz Wear Private Ltd. Pantaloons,
one of India's first formal trouser brands, is launched.
 1991:
Company's name changed to Pantaloon Fashions (India) Limited BARE, an Indian
denim brand is launched.
 1992:
Initial Public Offer (IPO) of shares by the Company
 1994:
The Pantaloon Shoppe, our exclusive menswear store in a franchisee format is
launched across the nation. The company starts distribution of branded garments
through multi-brand retail outlets across the nation.
 1997:
Pantaloon Retail enters modern retail with the launch of the first 8000-sq. ft. store
Pantaloons in Kolkata.
 2001:
Pantaloon Retail launches three Big Bazaar stores within a span of 22 days in
Kolkata, Bangalore and Hyderabad.
 2002:
Food Bazaar, the supermarket chain is launched.

 2003:
Big Bazaar entered Tier II cities with the launch of its store in Nagpur
 2004:
Pantaloon Retail launches India's first seamless mall, Central, in Bangalore.
 2005:
Big Bazaar launched a unique shopping program: the Big Bazaar Exchange Offer,
inviting customers to exchange household junk
 2006:
Big Bazaar launched India's most popular shopping festival: Sabse Sasta Din on 26th
January Big Bazaar launched Shakti, India's first credit card program tailored for
housewives Navaras Â– the jewellery store launched within Big Bazaar stores Home
Town, the home building and improvement products retail chain, is launched along
with consumer durables format Ezone and furniture chain Furniture Bazaar.
 2007:
Big Bazaar launched its 50th store in Kanpur Big Bazaar partnered with
Futurebazaar.com to launch India's most popular shopping portal Big Bazaar initiated
the Power of One campaign to help raise funds for the Save The Children India Fund
Pantaloon Retail wins the International Retailer of the Year award at US-based
National Retail Federation convention in New York, and Emerging Retailer of the
Year award at the World Retail Congress held in Barcelona.
 2009:
Big Bazaar initiated Maha Annasantarpane program at its stores in South India Â– a
unique initiative to offer meals to visitors and support local social organizations Big

Bazaar captured almost one-third share in food and grocery products sold through
modern retail in India Pantaloon Retail celebrates its first Shopping Festival across all
retail formats in key Indian cities.
2008 Big Bazaar dons a new look with a fresh new section, Fashion@Big Bazaar Big
Bazaar crosses the 100-store mark, marking one of the fastest expansions of the
hypermarket format anywhere in the world.
 2010:
Future Value Retail Limited is formed as a specialized subsidiary to spearhead the
group's value retail business through Big Bazaar, Food Bazaar and other formats
Pantaloons opened its 50th flagship store in New Delhi on 27th November 2010
Pantaloons embarked on its "next gen" journey with the launch of its new 'avatar'
stores Big Bazaar introduced Family Centre in Kolkata on 27th March 2010 Big
Bazaar opened its first store in Jalandar and Amravati Pantaloons forayed in
Allahabad,Bhopal and Aurangabad Future Group launched 'The Great Indian
Shopping Festival' Future Group announced the launch of mobile telephony services
under the brand name T24 on the GSM platform
 2011:
Future Group entered elite gourmet retailing with the launch of its first gourmet food
chain Food hall in Mumbai on 26th May 2011 Future Innoversity introduced MBA in
Supply chain Management Pantaloons launched its revamped Green Card Loyalty
Programme Pantaloons forayed in Coimbatore, Durgapur and Vizag Big Bazaar
completed 10 glorious years and came up with a new brand identity and tagline Naye
India ka bazaar Big Bazaar celebrated its 10 years of existence Big Bazaar opened its
first store in Himachal Pradesh on 21st May 2011

 2012:
On 1st May 2012, the company introduced a new retail initiative Â– Public Holiday
Sale Food hall the premium lifestyle food destination launched its second store in
Bengaluru on 4th May 2012 Big Bazaar redefined the concept of customer service
with the launch of the Rajajinagar Family Centre in Bengaluru with its unique Seva
initiative on 24th February 2012 Future Sharp Skills Ltd. launched its first skill centre
in Kolkata with a vision to train and provide sustainable livelihood to five lakh youth
of West Bengal by 2022 Pantaloons became the first retailer to introduce a reality
hunt as it set out on a countrywide search for their next Fresh Face Pantaloons
launched its first store in Ludhiana, Visakhapatnam, Bilaspur Future Group started
Aadhaar Franchise Future Supply Chains Express Logistics business became the
fastest profitable Express Business in India Keeping pace with the ongoing trends
Fashion@ Big Bazaar decided to reposition itself as FBB Pantaloons joined hands
with PAYBACK . Being India's largest and one of the strongest loyalty programs in
Europe, PAYBACK offers were made available to all Pantaloons customers Big
Bazaar launched its home delivery services in Mumbai
 2013:
Foodhall, the premium lifestyle food destination launched in Pune. First batch of
Future India Fellowship program started with 5 selected fellows across the country.
The fellowship aims to create thought leaders of tomorrow. Future Group successfully
introduced 'Big Bazaar Direct' an assisted shopping concept where franchises will sell
Big Bazaar products through a catalogue on a 'tablet'. Big Bazaar introduced an
exciting occasion for shopping 'April Utsav'. Future Group officially launched India's
largest State of the Art Logistical Distribution Hub at Nagpur. Big Bazaar introduced

a unique customer membership program 'Big Bazaar Profit Club.' Foodhall, the
premium lifestyle food destination launched in New Delhi. Future Sharp, the Future
Group arm that trains and develops the skills of youth opened its new skill centre in
Nashik.
 2014:
Future Group partnered with the Fortune 500 company and one of the largest online
shopping destination, Amazon Future Group partnered with world's leading customer
science company, dunnhumby for data analytics services Future Group announced its
strategic tie-up with SAP company hybris, that delivers OmniCommerceÂ™: state-
of-the-art master data management for commerce and unified commerce processes to
its clients. India's First Mega Food Park was inaugurated by India's Honourable PM
Shri Narendra Modi at Tumkur Karnataka HomeTown underwent a complete
makeover with a new tagline, 'The Art of Better Living', logo and in-store branding.
Future Group's premium food destination Foodhall launched in Saket, New Delhi. Big
Bazaar and Ezone were voted as one of the Top 50 Most Trusted Brands in the
country in the Brand Equity Survey 2013 conducted by Nielson. The survey also
revealed that Big Bazaar is the 4th Most Trusted Service Brand of the country FBB
ties up with India's largest Beauty Pageant Femina Miss India 2014 A New
Generation Big Bazaar; Big Bazaar Family Centre was launched at Alcove in Kolkata
on January 6, 2014.
 2015:
FBB became style partner of Asia's largest music festival, Sunburn Big Bazaar &
Ezone made to the Brand Equity's Top Retailer's List Future Group partnered with
India's fastest growing ayurvedic company, Patanjali Ayurveda. The Miss Universe

from Columbia, Paulina Vega launched Jealous 21's limited edition Miss Universe
Collection at Taj Land's End in Mumbai First Big Bazaar GEN NXT store designed
for smart and easy shopping experience opened in Infinity Mall, Malad, Mumbai Big
Bazaar announced an exclusive tie-up with a leading mobile wallet company,
MobiKwik The UK based Plymouth City College awarded Future Sharp with a title of
'The Best International Business Partner' T24, Future Group's unique telecom service
and loyalty program and of India's first unpaid GSM mobile service completed 5
eventful years The most affordable fashion destination, FBB signed youth style icons
Katrina Kaif and Varun Dhawan as its brand ambassadors Bharti Retail joins hands
with Future Retail Future Group forays into M-Commerce with the T24 Mobile App
Big Bazaar redefines weekends with the launch of a never-seen-before campaign,
'Crazy Weekend'. Future Group launched the new age convenience store format, KB's
Conveniently Yours.
 2016:
Future Group associated with Bajaj Finserv to launch India's first retail EMI card
Central @ Residency Road, Bangalore was launched with redesigned to provide
hassle free shopping for the customers Little Foodhall launched in Gurgaon Bazaar
Direct tied-up with Oxigen Services to sell the wide assortment of the franchisees.
Future Group's personal care brand, Kara Wipes associated with the most prestigious
beauty pageant of the country; FBB Femina Miss India 2016. Future Group's People
Office team receives ISO 9001: 2015 certification on Jan 5, 2016.

4.6 Brands under Future Group:
Future Group understands the soul of Indian consumers. As one of India's retail
pioneers with multiple retail formats, we connect a diverse and passionate community
of Indian buyers, sellers and businesses. The collective impact on business is
staggering: Almost 500 million customers walk into our stores each year and choose
products and services supplied by over 30,000 small, medium and large entrepreneurs
and manufacturers from across India. And this number is set to grow.
Future Group employs around 60,000 people directly from every section of our
society. We source our supplies from enterprises across the country, creating fresh
employment, impacting livelihoods, empowering local communities and fostering
mutual growth.
We believe in the 'Indian dream' and have aligned our business practices to our larger
objective of being a premier catalyst in India's consumption-led growth story.
Working towards this end, we are ushering positive socio-economic changes in
communities to help the Indian dream fly high and the 'Sone Ki Chidiya' soar once
again. This approach remains embedded in our ethos even as we rapidly expand our
footprints deeper into India.

Various Brands:
1 Big bazaar
2 Central
3 Food World
4 Nilgiris

5 Koryo
6 Heritage
7 Lee cooper
8 Hyper City

9 Celio
Fashion Big
10
Bazaar
Various
11
Categories

4.7 Products Profile:
 Retail Services
 KORYO (Chinese Re-branding)
 Food Bazaar
 FBB
 Aadhaar Wholesale
 HomeTown
 E Zone
 Foodhall
 Easyday
 Big Bazaar
 Nilgiris 1905
 Heritage Fresh

 HyperCity
 Lifestyle Fashion:
 Central
 Brand Factory
 Planet Sport
 I AM IN
 Fashion and lifestyle:
 Indigo
 Nation Scullers
 John Millers
 All
 Rig
 Coverstory
 DJ&C
 Buffalo
 Hey
 Converse
 Bare
 Clarks
 Holii
 UMM
 Urban Yoga

 Integrated foods and FMCG
 Nilgiris
 Tasty Treat
 Fresh & Pure
 Ektaa
 Premium Harvest
 Mera Swad
 Pratha
 Punya
 Sach
 Kosh
 Sunkist
 Kara
 TS
 Clean mate
 Care mate
 Swiss tempelle
 Baker street
 Golden Harvest

4.8 Beliefs, Mission and Value Policy:
A. Beliefs:
Future Group was founded on a simple idea: Rewrite rules, retain values. This
fundamental belief created a new kind of marketplace, forever transforming
Indian retail. Today our core values continue to guide how we do business and
improve the quality of life of the people we serve.
At Future Group we are committed to being a catalyst of positive change in the
communities, societies and business sectors in which we operate. We envision
India’s transformation into the legendary ‘Sone Ki Chidiya‘ (golden bird), taking
wings once again to reach greater heights.
We take pride in our Indianness. Our belief in inclusiveness for long-term
sustainable growth and economic prosperity evokes trust among consumers,
employees, suppliers, partners, shareholders and the community.
B. Mission:
 We share the vision and belief that our customers and stakeholders shall be
served only by creating and executing future scenarios in the consumption space
leading to economic development.
 We will be the trendsetters in evolving delivery formats, creating retail realty,
making consumption affordable for all customer segments – for classes and for
masses.
 We shall infuse Indian brands with confidence and renewed ambition.
 We shall be efficient, cost- conscious and committed to quality in whatever we
do.

 We shall ensure that our positive attitude, sincerity, humility and united
determination shall be the driving force to make us successful.
C. Values:
 Indianness: Believing in the Indian way and in oneself
 Leadership: In thought and in business
 Respect & Humility: In dealing with everyone within & outside the
organization
 Introspection: For continuous learning, self-development and personal
excellence
 Openness & Adaptability: Open to new ideas, knowledge and proactive in
meeting challenges emerging from changing business scenarios
 Valuing and Nurturing Relationships: With customers, business associates,
stakeholders, communities and society
 Simplicity & Positivity: To foster innovation, speed and imagination
 Flow: Learn and be inspired from the universal laws of nature.

4.9 Awards and Recognition:

 Silver at Effie 2018
Big Bazaar won Silver for its Grahpravesh campaign at Effie 2018 under the Retail
section
 Cold Chain Strategy Summit 2017
Future Supply Chain won Best Cold Chain 3PL Service Provider at Cold Chain
Strategy Summit 2017 held by Kamikaze B2B Media
 The Goa State Logistics, Supply Chain & Warehousing Leadership Awards
2017
Future Supply Chain won Best 3PL Company of the Year at The Goa State
Logistics, Supply Chain & Warehousing Leadership Awards 2017 endorsed by CSR
and CMO Asia;
 ELSC 2017
Future Supply Chain won Best 3PL Company of the Year at ELSC 2017 held by
Kamikaze B2B Media;
Future Supply Chain won Industry Excellence in Supply Chain – FMCG at ELSC
2017 held by Kamikaze B2B Media;
 SCALE Awards by CII
The Excellence Award Position under Industrial / Retail Warehousing was won by
Future Supply Chain at SCALE Awards by CII – Institute of Logistics;
 World Innovation Congress & Awards
Future Supply Chain won Best 3PL Solutions Award held by World Innovation
Congress & Awards;
The Most innovation Supply Chain Provider of the year held by World Innovation
Congress & Awards was won by Future Supply Chain
 Global Logistics Excellence Awards
Future Supply Chain won Digital transformation & Supply Chain Excellence in
Warehousing Management at Global Logistics Excellence Awards;
Future Supply Chain won Indian 3PL of the year at Global Logistics Excellence
Awards

 Manufacturing Supply Chain Summit & Awards
future supply chain won operational excellence in safety initiative at the 8th edition
of manufacturing supply chain summit & awards held by kamikaze b2b media;
Quality excellence in reverse logistics was won by future supply chain at the 8th
edition of manufacturing supply chain summit & awards held by kamikaze b2b
media
 Financial Express Awards
Future Supply Chain won Financial Express CFO Award 2018 – Medium Enterprise
by Financial Express
 IMAGES Most Admired Retailer of the Year Innovative Retail Concept
FBB won images most admired retailer of the year innovative retail concept at
images retail awards 2018
 IMAGES Most Effective Marketing and Promotions Campaign of the Year
FBB won images most effective marketing and promotions campaign of the year at
images retail awards 2018
 IMAGES Most Admired National Supermarket
Easy day won images most admired national supermarket at images retail awards
2018
 Most Innovative Retailer of the Year Award
Cover Story, the fast fashion brand under Future Style Labs, won the Most
Innovative Retailer of the Year Award at the 16th Annual Franchise & 13th Star
Retailer awards night.

4.10 SWOT Analysis:

Future Group
Parent Company Future Group
Category Retail
Sector Lifestyle and Retail
Tagline/Slogan Indian tomorrow!
USP Deliver everything to

everyone
Future Group STP
Segment Cost conscious group
Target Group Middle class and upper

middle class
Everything to everyone
Positioning in profitable manner
Below is the Strengths, Weaknesses, Opportunities & Threats (SWOT) Analysis of Future
Group:
 Strengths:
1. Wide presence in India covering almost all major cities and towns.
2. Efficient, cost conscious committed quality service.
3. High brand equity in evolving market
4. Variety of products under single window increasing the chances of customer time
and choices.
5. Has an employee base of over 35,000
6. Everyday low prices, which attract customers, and has a huge investment capacity.
7. It offers a family shopping experience, where entire family can visit together.

8. Available facilities such as online booking and delivery of goods.
 Weaknesses:
1. Dependent heavily on India, and is susceptible to foreign players
2. Stiff competition from global players means market share growth is limited
3. Extremely popular means heavily crowded during festive/discount seasons
 Opportunities:
1. Evolving customer preference in recent year
2. Organized retail is minute in India
3. Global expansion and tie-ups with international brands
 Threats:
1. Global players trying to enter into Indian market
2. Low priced product could be perceived as low quality product
3. Government policies are not well defined in country like India
 Competitors:
Below are the 5 main Future Group competitors:
1. Reliance retail
2. Birla group retail
3. K Raheja Corp Group
4. Walmart
5.Subhiksha

Chapter 5
Data Analysis And
Interpretation

Table showing net cash from Operating Activity:
(Rs. in crores)
Year Net Cash From Percentage (%)

Operating Activity
2016-17 261.99 24.7
2017-18 197.03 18.6
2018-19 600.59 56.7
Total 1059.61 100
Analysis:
The above table reveals the net cash from operating activities. It includes profit before tax,
operating profit before working capital changes, cash generated from operation and taxes
paid.
The total cash from operating activities is 1059.61 crores which include cash from operating
activities of 261.99 crores of 2016-17 and in the year 2017-18 it has decreased to 197.03
crores later in the year 2018-19 it has gradually increased to 600.59 crores.

Graph showing Net Cash from Operating Activity:
Net Cash From Operating Activity (%)

120
100
100
80
56.7
60
40
24.7
18.6
20
0
2016-17 2017-18 2018-19 Total
Interpretation:
The net cash from operating activities was 24.7% in the year 2016 and the company was in
good position during that year. Later in the year 2017 there was no big change, like it is
decreased to 18.6%. But there was some improvement in 2018, like it is increased to 56.7%.
This shows that the bank is facing problem in operating activities.
From the above graph it is inferred that the net cash from operating activities of the company
is not good and were fluctuating during these years.

Table showing net cash from Investing Activity:
(Rs. In crores)
Year Net Cash From Percentage

Investing Activity
2016-17 (300.24) -35.53
2017-18 (75.68) -8.10
2018-19 (468.91) -55.50
Total (844.83) 100
Analysis:
The above table reveals the net cash from investing activities. It includes purchase of
property, plant and equipment, intangible assets, purchase of investment, sale of investment,
interest received. The total cash from investing activities is -844.83 crores which include cash
from investing activities of -300.24 crores of 2016-17 and in the year 2017-18 it has
increased to -75.68 crores later in the year 2018-19 it has gradually decreased to -468.91
crores.

Graph showing Net Cash from Investing Activity
Net Cash from Investing Activity (%)

0
-8.96
-20
-40
-35.54
-60
-55.5
-80
-100
-100
-120
2016-17 2017-18 2018-19 Total
Interpretation:
The net cash from investing activities was -35.54% in 2016 and it is just increased to -8.96%
in 2017. In the year 2018 it is again decreased to -55.5% respectively During the 3years there
were ups and downs in the net cash from investing activities but at last it has only decreased
from -35.54% to -55.5%
From the above graph it is inferred that the net cash from investing activities is decreasing
gradually and were fluctuating during these years.

Table showing net cash from Financing Activity:
(Rs. in crores)
Year Net Cash From Percentage

Financing Activity
2016-17 (11.31) -4.92
2017-18 (88.41) -38.41
2018-19 (130.47) -56.68
Total (230.19) 100
Analysis:
The above table reveals the net cash from financing activities. It includes proceeds from issue
of shares, proceeds from borrowings, interest paid.
The total cash from investing activities is -230.19 crores which include cash from financing
activities of -11.31crores of 2016-17 and in the year 2017-18 it has decreased to -88.41 crores
later in the year 2018-19 it has gradually decreased to -130.47 crores.

Graph showing Net Cash from financing Activity:
Net Cash from Financing Activity (%)

0
-4.92
-20
-40
-38.41
-60
-56.68
-80
-100
-100
-120
2016-17 2017-18 2018-19 Total
Interpretation:
The net cash from financing activities was -4.92% during the year 2016 and was gradually
decreased to -38.41% in 2017 and again in 2018 it has just decreased to –59.68%. During the
3 years the net cash from financing activities has been decreasing which shows that there was
no improvement during these 3 years.
From the above graph it is inferred that the net cash from financing activities is decreasing
gradually during these years.

Table showing Net decrease/increase in Cash and Cash Equivalents
(Rs. in crores)
Year Net decrease/increase Percentage

in Cash and Cash
Equivalents
2016-17 8.16 13.10
2017-18 38.96 62.58
2018-19 15.14 24.34
Total 62.26 100
Analysis:

Graph showing Net decrease/increase in Cash and Cash Equivalents:
Net decrease/increase in Cash and Cash

Equivalents (%)
120
100
100
80 62.58
60
40
24.34
20 13.1
0
2016-17 2017-18 2018-19 Total
Interpretation:
The net cash and cash equivalents were increased and decreased in the last 3 years. In the
year 2016 it is 13.1% and it is just gradually increased to 62.58% in 2017 and finally it is
gradually decreased to 24.34% in the last year 2018. This shows that the company’s cash
position was good in 2017.
From the above graph it is inferred that the net cash and cash equivalents increased and
decreased gradually and were fluctuating during these years

Table Showing Opening Cash and Cash Equivalents:
(Rs. in Crores)
Year Opening Cash and Percentage

Cash Equivalents
2016-17 8.33 5.73
2017-18 8.49 5.84
2018-19 128.45 88.42
Total 145.27 100
Analysis:

Graph showing Opening Cash and Cash Equivalents:
Opening Cash and Cash Equivalents (%)

120
100
100
88.42
80
60
40
20 5.84
5.73
0
2016-17 2017-18 2018-19 Total

Table Showing Closing Cash and Cash Equivalents:
(Rs. in crores)
year Closing Cash and Cash Percentage

Equivalents
2016-17 89.49 24.75
2017-18 128.45 35.53
2018-19 143.59 39.71
Total 361.53 100

Graph showing Closing Cash and Cash Equivalents:
Closing Cash and Cash Equivalents (%)

120
100
100
80
60
35.53 39.71
40
24.75
20
0
2016-17 2017-18 2018-19 Total

Table showing net cash flow:
(Rs. in crores)
year operating investing financing Total

2016-17 261.99 (300.24) (88.41) -126.66
2017-18 197.03 (75.68) (11.31) 110.04
2018-19 600.59 (468.91) (130.47) 1.21

Graph showing Net Cash Flow:
Net Cash Flow

150
110.04
100
50
1.21
0
-50
-100
-150 -126.66
2016-17 2017-18 2018-19

Table showing Net Profit:
(Rs. in crores)
year Net profit Percentage

2016-17 15.09 3.82
2017-18 368.28 93.31
2018-19 11.31 2.87
Total 394.68 100

Graph showing net showing:
Net Profit (%)

120
93.31 100
100
80
60
40
20
3.82 2.87
0
2016-17 2017-18 2018-19 Total

Table showing current ratio:
(Rs. in crores)
2016-17 2017-18 2018-19

Current assets 5015.50 6021.38 6735.87
Current liabilities 3545.34 4193.42 4704.12
Current ratio 1.42 1.44 1.44

Graph showing Current Ratio:
Current Ratio
1.445
1.44 1.44
1.44
1.435
1.43
1.425
1.42
1.42
1.415
1.41
2016-17 2017-18 2018-19

Table showing operating cash flow ratio:
(Rs. in crores)
2016-17 2017-18 2018-19

Operating cash flow 261.99 197.03 600.59
operating cash flow 0.074 0.049 0.128
ratio

Graph showing operating cash flow ratio:
Operating Cash Flow Ratio

0.14
0.128
0.12
0.1
0.08 0.074
0.06 0.049
0.04
0.02
0
2016-17 2017-18 2018-19

Table showing Cash Flow Margin Ratio:
(Rs. in crores)
2016-17 2017-18 2018-19

Net sales 6845.13 17075.09 18477.97
Cash Flow Margin 0.038 0.012 0.032
Ratio

Graph showing cash flow margin ratio:
Cash Flow Margin Ratio

0.04 0.038
0.035 0.032
0.03
0.025
0.02
0.015 0.012
0.01
0.005
0
2016-17 2017-18 2018-19
\
Table showing Cash Flow to Current Liabilities ratio:
(Rs. in crores)
2016-17 2017-18 2018-19

Average current 1772.67 2096.71 2352.06
liabilities
Cash Flow to 0.148 0.094 0.255
Current Liabilities
ratio

Graph showing cash flow to current liabilities ratio:
Cash Flow to Current Liabilities Ratio

0.3
0.255
0.25
0.2
0.148
0.15
0.094
0.1
0.05
0
2016-17 2017-18 2018-19

Table showing Quick Ratio:
(Rs. in crores)
2016-17 2017-18 2018-19

Current assets 5015.50 6021.38 6735.87
(-): inventory 3297.24 3735.16 4417.41
1718.26 2286.22 2318.46
Quick Ratio 0.485 0.546 0.493

Graph showing quick ratio:
Quick Ratio
0.56
0.55 0.546
0.54
0.53
0.52
0.51
0.493
0.5
0.49 0.485
0.48
0.47
0.46
0.45
2016-17 2017-18 2018-19

Table showing asset efficiency ratio:
(Rs. in crores)
2016-17 2017-18 2018-19

Operating cash 261.99 197.03 600.59
flow
Average total 2792.725 3468.765 4097.24
assets
asset efficiency 0.094 0.056 0.147
ratio

Graph showing asset efficiency ratio:
Asset Efficiency Ratio

0.16 0.147
0.14
0.12
0.1 0.094
0.08
0.056
0.06
0.04
0.02
0
2016-17 2017-18 2018-19

Table showing Short-Term Debt Coverage ratio:
(Rs. in crores)
2016-17 2017-18 2018-19

Operating cash 261.99 197.03 600.59
flow
Short-Term Debt 968.20 1,077.59 1,001.41
Short-Term Debt 0.271 0.183 0.60
Coverage ratio

Graph showing Short Term Debt Coverage Ratio:
Short-Term Debt Coverage Ratio

0.7
0.6
0.6
0.5
0.4
0.3 0.271
0.183
0.2
0.1
0
2016-17 2017-18 2018-19

Table showing cash ratio:
(Rs. in crores)
2016-17 2017-18 2018-19

Cash and cash 89.49 128.45 143.59
equivalents
Cash ratio 0.025 0.031 0.030

Graph showing Cash Ratio:
Cash Ratio
0.035
0.031 0.03
0.03
0.025
0.025
0.02
0.015
0.01
0.005
0
2016-17 2017-18 2018-19

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Analysis of Cash Flow Statement

BISHOP COTTON WOMEN’S CHRISTIAN COLLEGE Page 1

1.1 Introduction to Cash:

business operations is the basis of business solvency.

cash flow or as a way to avoid a downturn on financial markets. From an accounting

other currencies, as well as un deposited cheques and amounts in a current account.

BISHOP COTTON WOMEN’S CHRISTIAN COLLEGE Page 2

implies a proper balancing between the two conflicting objectives of liquidity

cash inflows and cash outflows of a particular period.

1.2 Cash in Accounting

debit side and decreased on the credit side.

1.3 Where does Cash come from?

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1.4 Meaning of Cash:

increase the cash account. A credit entry would do the opposite.

Accounting Example of Cash:

the cash account is not distorted on the balance sheet.

1.5 Meaning of Cash Flow Statement:

short-term viability of a company, particularly its ability to pay bills.

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Cash inflows and Cash outflows:

planning and management.

lenders and investors about the health of their business.

Cash Inflows key elements:

 Payment for goods or services from your customers.

 Receipt of a bank loan.

 Interest on savings and investments.

 Increased bank overdrafts or loans.

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Cash Outflows key elements:

 Purchase of stock, raw materials or tools.

 Wages, rents and daily operating expenses.

 Purchase of fixed assets – PCs, machinery, office furniture, etc.

 Income tax, corporation tax, VAT and other taxes.

 Reduced overdraft facilities.

1.6 Objectives of Cash Flow Statement:

flows in future circumstances

3. To improve the comparability of different firms' operating performance by eliminating

the effects of different accounting methods

4. To indicate the amount, timing and probability of future cash flows

1.7 Information required for the preparation of a Cash Flow Statement:

 Comparative Balance Sheets:

of changes that have taken place in assets, liabilities and capital.

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 Profit and Loss Account:

non-cash, current assets and currents liabilities.

been provided or used e.g. sale or purchase of assets for cash.

1.8 Types of cash flow activities:

business is called cash outflow.

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Amortization of Intangible Assets, Preliminary Expenses, Debenture Discount etc. are

and Non-Cash Transactions are omitted.

Items of cash inflow

 Cash receipts from royalties, fees, commissions, and other revenue

Items of cash outflow

 Cash payment to suppliers for goods and services

 Cash payments to and on behalf of employees

dealing or trading purposes etc.

affect the Cash.

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liabilities to obtain Net Cash Flows from Operating Activities.

2. Cash Flows from Investing Activities :

flows arising from Investing Activities is important.

Items of cash inflows from investing activities: