INTRODUCTION OF THE FUNDS FLOW STATEMENTS

Significant Technique of Financial Analysis is funds flow Analysis designed to Highlights changes in the Financial condition of a Business-concern between two points in time which generally confirm, to beginning and ending financial statement dates for whatever period of examination is relevant. Although financial statement supply useful information to management in as much as the balance sheet portrays the financial position of the enterprise and the income statement describe the nature of changes in own ship as a result of periods productive and commercial activities these statement fail to mirror the funds changes which have taken place over a given time span. They do not spell out the movement of funds. It is more important to describe the source from which additional funds. It is more important to describe the source from which additional funds were derived and the uses to which these funds were put because the ultimate success of a business enterprise depends on-where got where one situation so the funds flow statement is, therefore prepared to uncover. The information, which the financial statement fail to describe clearly.

Thus funds flow statement is a report which summarize the event taking, place Between two accounting periods, it spells.

NEED FOR THE STUDY

There is a need to analyze the Funds flow analysis of any company for various statutory and internal requirements to know the performance of the company. This analysis will be useful to many persons who are directly or indirectly related to company.. Here in this study I used technique of Funds flow analysis. To know the companys Assets and Liabilities management in the above mentioned period. The need for study is improve the financial position of the company. To analysis the existing situation of the company. To improve the grey areas of the company. The financial Department can implement and can get positive result by maintaining proper financial reports.

Objectives of the study

In pursuance of the set aspects the study has been under taken with the following objectives

1.

To find out the sources from where funds are obtained by the organization

2.

To find out the application areas of funds

3.

To examine the amount of funds used for investment, financing, and operating activities

4.

To formulate the financial policies like dividend, reserve etc

5.

To find out the sound and weak financial position of the enterprise

6.

To find out the causes for changes in working capital

METHODOLOGY OF THE STUDY

The study is based on survey method to fulfill the objectives of the study primary and secondary data have been collected.

PRIMARY DATA:

No questionnaire was used since the project required.

SECONDARY DATA:

The Secondary data have been collected from existing records of the office of the THE GLOBAL GREEN COMPANY. The information had obtained the companies annual reports, audit repots and other records. Relevant data was also collected from journals, periodicals and reference books of paper industry.

SCOPE OF THE STUDY

The present study is confined to THE GLOBAL GREEN COMPANY Area the study of fixed capital covers the aspects of fixed capital, working capital management, together with the relevant ratios. The study is finally confined only to the problem and prospects of capital structure of working capital management relating to THE GLOBAL GREEN COMPANY

STATISTICAL TECHNIQUES USED FOR THE STUDY

1. 2. 3.

Percentage analysis Funds flow statement Statement of changes in working capital

LIMITATIONS OF THE STUDY

The study of funds flow analysis does not reflect the whole financial position of the organization. 1. 2. 3. The study is based on the funds flow analysis only. The source of the study is limited to 5 years from 2007-08 to 2011-12. The information collected through personal interaction with the management is strictly confirmed their views.

FORMAT OF BALANCE SHEET:

The Balance sheet can be presented in two ways 1.Horizontal presentation and 2.Vertical presentation

Under Horizontal presentation the Assets and Liabilities are shown side by side. Assets are shown on the Right-hand side and Liabilities on the Left-hand side. In the V.S.A. Assets are shown on the left-hand side and liabilities on the Right Hand side.

REVIEW OF LITERATURE

Research into fund flows generally focuses on either individual fund flows or aggregate fund flows. At the individual fund level, there is well-documented evidence supporting: elation between fund flow and past performance. Further, the relation between flow and performance is asymmetric, as investors reward superior performance by placing a disproportionately large amour of money with these funds.

Del Guerio and Tkac, 2007). More recently some studies have also found a relation between flow and contemporaneous fund performance (Deaves, 2004; O'Neal, 2004; Cashman et al.. 2006). While other factors such as marketing, belonging to a fund family, fees and expenses, fund return volatility, size, age and style (Sirri and Tufano, 1998; Jain and Wu, 2000; Nanda, Wang and Zheng, 2003: Huang, Wei and Yan, 2007), have been demonstrated to be related to flow, survey evidence suggests that past fund (Goetzmann and Peles, 1997; Wilcox, 2003)

Research into aggregate flows reveals that there is a contemporaneous relation between aggregate fund flow and the return on the market as a whole (Warther, 1995; Remoloa, Kleiman and Gruenstcin, 1997; Edelen and Warner, 2001; Luo, 2003), which suggests that investors, consider current market conditions. Additionally, although the findings are not entirely consist, the evidence generally suggests that lagged market returns do not have any impact on aggregate flow (Patel, Zeekhauser and Hendricks, 1994; Warther, 1995; Potter. 2000; Karceski, 2002).

FUNDS FLOW ANALYSIS:

The balance sheet presents a snap picture of the financial position at a given point time and the incomes statement shows a summary of revenue and expenses during the accounting period. The funds flow statement also referred to as the statement of changes in financial position or the statement of sources and uses or funds, Drawing on the information contained in the basic Financial statements, shown the sources of funds and application of funds during the period. Funds flow analysis provides in sight in to movement of funds and helps in under standing the changes in the structure of assets, liabilities and owners equity.

Funds are defined as total resource most commonly how ever funds are defined as working capital or cash. The preparation on the funds flow statements on total resources basis is fairly simple. When funds are defines as total resources.

The sources of funds are equal to the use funds, thanks to the use funds thanks to basic accounting identity according to which assets are equal to owners equity plus liabilities.

A SOURCE OF WORKING CAPITAL:

1.

OPERATORS:

The operators of the business Generate Revenue and entail expenses Revenues Management working capital and expenses, theyre than Depreciation and other amounts

Decrease working Capital. Hence the working capital increase account or operations is equal to Net income Depreciation..

2.

ISSUE OF SHARE CAPITAL: An issue of share results in and inflow or and increase in short term receivables.

3.

LONG TERM BORROWINGS When long-term loan is taken are an increase in working capital because of

cash inflow. A short-term loan how ever does not have any effect on working capital. Why a short-term loan increase current assets (cash0 and a current Liability (short-term loan) by the same amount leaving the working capital position uncharged. 4. SALE OF NON CURRENT ASSETS: When fixed assets or a long-term investment or any other non current assets is sold there is a working capital inflow represented by cash or short-term receivables.

USES OF WORKING CAPITAL:

1. 2. Dividend payment this transaction results in a cash out flow. Repayment of long term liability the repayment of long tern-I loans, Debenture,

and other long term liabilities involoves cash out flow and hence a use a working Capital. The repayment of current Liability. It may be noted does not effect the working capital position because it entails an equal reduction in current liabilities it entail an equal-reduction in current liabilities and current assets.

3.

Purchase of Non current assets when a Firm purchases-fixed assets, long-term

Investments, or other Non-current assets. It pays cash or incurs a, short terms DABIT. Hence working Capital Decreases.

FUNDS FLOW STATEMENT-CASH BASIS:

The funds flow statements on cash basis shows SOURCES OF CASH USE OF CASH AND The Net change in cash, the source of cash are they Sources of working capital

plus changes.

Within, the working capitals account which argument the cash resources of the business. They are simply the decreases in current assets other than cash, of course. The uses of cash again or the changes which use working Capital plus changes within the working capital account of which deplete the cash resources of the business. These latter changes are simply the increased in current assets other than cash the sources and uses of cash are listed below.

SOURCES OF CASH:

Operations Net Income Depreciation Issue of Share capital Long term Borrowings Sale of Non current Liabilities Increase in current assets Other than cash

USES OF CASH:

Payments of dividends Purchase of non current assets Repayment of long-term borrowings Decreasing current liabilities Increasing current assets Other than cash

1. CURRENT ASSEST:

The term current assets includes which are acquired with the intention of converting them into cash during the normal business operations of the company. However, the best definition of the term current assets has been given by grade in the following words.

For accounting purposes, the term current assets is used to designate cash and other assets or resources commonly identified as those which are reasonably expected during the normal operating cycle of the business.

The board categories of current assets, therefore, are

Cash including fixed deposit with bands.

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Account receivable, I.e., trade debtors and bills receivable, Inventory, I.e., stock or raw materials work in progress, finished goods, stores

and spare parts. Advances recoverable, I.e., the advance given supplier of goods and services or

deposits with government or other public authorities, e.g., customs, port authorities, advance income tax, etc., Pre-paid expensed I.e., cost of unexpired services, e.g., insurance premium paid

in advance, etc It should be noted that short term investment should be included in the definition of the current assets while loose tools should be excluded from the category of current assets, of course, this is not strictly according to the requirement of the companies act regarding presentation of financial statement where investment even through held temporarily are to be shone, separately from current assets as while loose tools are to be shown under the category of current assets.

2.

CURRENT LIABILITES:

The term current liabilities is used principality designate such obligations whose liquidation is reasonable expected to require the use of assets classified as current liabilities or those expected to be satisfied. Within a relatively short period of time usually one year. However, the concept of current liabilities has now undergone a change. The more modern version designate current liabilities as all obligations that will require with line coming year or the operating cycle, whichever is longer

1.The use of exiting current assets or the operating cycle.

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2. The creation of other current liabilities. In other words the mere fact that an amount is due with line a year does not make it a current liability unless it is payable out. Of existing current assets or by creation of current liabilities. For example debentures due too redemption with in a year of the balance sheet data will not be taken as current liability if they are to be paid out of the proceeds realized on account of sale of debentures or out of the proceeds realized on account of sale of debenture redemption fund investments. The term current liabilities also include amount set apart of provided for any known liability, which the amount cannot be determined with substantial accuracy, e.g. Provision rather the liabilities.

The Board Categories of Current Liabilities are

1. 2.

Accounts payable i.e., Bills payable and trade creditors. Out standing expenses i.e., Expenses for which services have been received by the business but for which the payment has not been made.

3. 4.

Bank Overdrafts. Short-term loans i.e., Loans from banks etc., which are payable with in one year from the date of Balance Sheet.

5.

Advance Payment Received by the business for the services to been rendered or goods to be supplied in future.

6.

Current Maturates of long term Loans, i.e., Long Term Debts due within a year of the Balance sheet date or installments due within a year in repeat of these loans, provided payable out of existing Current Assets or by creation of Current Liabilities, as discussed earlier.

12

How ever installments of long term loans due after a year should be taken as non-current liabilities.

ROVISIONS AGAINST CURRENT ASSETS:

All assets other than current assets come within the category of Non current assets. Such assets include

1.Good will 2. Land &building 3.machinery 4.furniture 5.Long -term investments 6.Patient right-Trade marks 7.Debit Balance of the profit and Loss Account 8.Discount on issue of shares and Debentures 9.Preliminary Expenses etc.

NON CURRENT LIABLITIES:

All Liabilities than current liabilities comes within category of Non-current Liabilities. They include.

1. 2. 3. 4.

Share capital premium Credit balance in the profit and loss account Revenue Dividend equalization Fund Debentures Sinking Fund

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5.

Capital Redemption Reserves etc.

STATEMENT OF CHANGES IN FINANCIAL POSISTION& (SCFP) WORKING CAPITAL BASIS:

The Net Working Capital.of a firm is the amount by which its current assets, CA exceeds its current laiblities, etc., The Magnitude of working factor that exits; for the protection of short term creditors. Working capital may also be viewed as funds

available for acquisition of Non Current Assets as well as to repay Non-Current Liabilities. Any transaction that results in an increase in working capital is a source or working capital: any transaction that causes a net decrease in working capital is an application capital. Some transactions merely change the form of working capital. Without altering the amount of working capital as such clearly, such items neither institutes a source or the use of Working Capital.

GENERAL RULES:

Let us formulate some General Rules to, as certain which transactions give rise to a source or a use of working capital and which not. This exercise is useful for the preparation of the funds flow statement Symbolically, WC=CA-CL A) Transactions Sanctions affecting we An increase in CA causes a Decrease: in WC. A Decrease in CA causes decreases in WC.

14

An increase in CL CAUSES a decrease in WC. A Decrease in CL causes an increase in WC.

B) Transactions not affecting WC.

An increase in CA and increase in CL does not affect WC. A Decrease in CA and Decrease in CL does not affect WC.

FUNDS FROM BUSINESS OPERATIONS:

The profit or loss Figure as shown in the profit and loss Account of the firm, does not indicate the Quotation of working Capital provided by Business Operations because shown do not run parallel to the flow of Working Capital.

The Profit and Loss Account contains a variety of writes-off and other adjustments that do not involve any corresponding movement of funds. Therefore, appropriate adjustment is to make the profit disclosed by the profit and loss adjustment are to be made to the profit disclosed by the profit and loss account To arrive at the funds from business Operations. For these purposes:

All search expenses, which do not reduce Working Capital, are to be added bank. Such items, which have been added to revenue but have not Contributed to the Working Capital, are to be subtracted, and

15

All such revenue, which are not directly caused by Business operations should also be deducted and shown separately in the statement. The items requiring adjustments are listed in adjustment to profit

A. B. C.

Net income (or loss) as shown by the profit and loss account. Add: Ddeprecation Expenses. Amortization or good will, patents and other intangible assets, amortization or discount on debentures or shares issue expenses; amortization of Extraordinary losses occurred in previous years; loss on sale or Non-current Assets.

D.

Loss; Amortization of premium received on debentures; profit on investment (Reported Separately).

E.

(A+B_C)=Funds from Business Operations.

The following extracts from the balance sheet of a company will give a more detailed and clear concept of the term flow of fund

NON-CURRENT LIABILITIES Share capital Redeemable preference share Loan on mortgage Reserves and surplus General reserve Profit and loss account

NON-CURRENT ASSETS Goodwill Buildings Plant Furniture Long term Investments

16

CURRENT LIABILITIES Sundry Creditors Bills payable Bank overdraft Outstanding expenses Total current liabilities Total liabilities

CURRENT ASSETS Sundry debtors Bills receivables Inventories Prepaid expenses Cash balances Total current assets

CURRENT LIABILITIES Bank overdraft Outstanding expenses Bills payables Flow of funds

FIXED LIABILITIES Share capital Reserves and surplus Debentures Long term loans Non flow of funds

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USES OF FUNDS FLOW STATEMENT:

Funds flow statement help-s the financial analyst in having a more detailed analysis and understandings of changes in the distribution of resources between two balance sheet dates. In cash such study is required regarding the future working capital position of the company. A projected funds flow statement can be prepared.

THE USES OF A FUNDS FLOW STATEMENT CAN BE PUT AS FOLLOWS:

It explains the financial consequence of business operations. Funds flow statement provides a ready answer to show many conflicting situations, such as: In what way the Management has Utilization the funds in the and what are going to be likely used of funds? It is a test as to effective or otherwise use of Working Capital.

Funds Flow Statement is a test of effective use of Working Capital by the Management furring a particular period. The use of funds should be phased in such a order that the available resources are put to the best use of the enterprise.

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MEANING OF CASH FLOW STATEMENT

Cash Flow Statement is a statement Depicting in cash position from one period to another, for example: If the cash balance of a business is shown by its balance sheet on 31st December 2005 is Rs. 20,000/- while the cash balance as per its balance sheet on 31st December 2006 is Rs. 30,000/-.

There has been an inflow of cash of Rs. 10,000/- in the year 2005 as compared to the year 2004. The Cash Flow Statement explains the reason for such inflows or outflows of cash, as the case may be it also helps management in making plans for immediate future. A projected cash flow statement or cash budget will help the management in as creating hoe much cash will be available to meet the obligations to trade creditors, to pay bank loans and to pay dividend to the share holders. A proper planning to the cash resources will enable the Management to have cash available whenever needed and put it to some productive use in case there is surplus cash available.

The term CASH here stands for cash and bank balance. It has already been explained in the previous chapter that the term FUNDS, in a narrow sense, is also used to denote cash. In such a case, the term FUNDS will exclude trumpet all other current assets and current liabilities and the term, FUNDS FLOW STATEMENT and CASH FLOW STATEMENT will have synonymous, meaning. However, for the purpose of this study, we are calling this part of study cash flow analysis and not funds flow analysis.

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The utility of the funds flow statement terms from the fact that it enable share holders, creditors and other interested in the enterprise to evaluate the uses of funds by the enterprise and to determine how these uses are financed. Thus, the outside parties can have clear knowledge about the financial policies that the company has purposed. In the light whether or not investment in the enterprise and on what terms if funds have to be invested. The funds statement & provides as in sight into the Financial operations of a Business Enterprises An insight valuable plans of the enterprises and the impact of these plans on Liquidity. He can detect imbalances in the uses of the funds and under take remedial actions. For example, and analysis of funds flow position for the past several years might disclose that inventories have expanded at more sharper rate than the growth of other assets and sales. Upon detailed analysis, the finance Manager might find that the inefficient inventory Management of the Enterprise was the Root cause of the melody. Thus the funds statement draws the attention of the finance manager to problem, which calls for detailed analysis and immediate action.

With the help of the funds-statement the analyst can evaluate the financing of the enterprise. An analysis of, the Major source of funds in the past reveals what portion of the growth was financed internally and what portion externally. The statement is also meaningful in judging whether the company has grown at too fast a rate and whether financing is strained. For example we can determine if trade credit has increased at relatively higher rate. One would wish to evaluate the cause quenches of slowness in trade payments on the credit of the company and its ability to finance in future.

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The funds flown statement serves as handmaid to the Finance Manager. In deciding make-up of capitalization. Estimated uses of funds for new fixed assets, for working Capital. For working capital. For dividends and for the repayment or debt are made for which of several future years. Estimates are made of the funds to be provided by operations, and borrowing or the issuance of new securities must obtain the balance. If the indicated amount of new funds required is greater than the finance Manager thinks it is feasible to raise, then the plans for new assets acquisition and divided policies are reexamined so that the uses of funds can be brought in to balance with anticipate sources of financing them. In particular, funds statement is very useful in planning intermediate and long term financing.

Such statement also serves, as control devise in that the statement compared with the budgeted fugues will show to what extent the funds were put to use according to 4an. This enables the finance manager to find out deviation from the planned course or action and take remedial steps to correct the deviations.

In view or these, funds statement is becoming popular with the management. Even some bank manager requests borrowers to furnish a funds statement along with their annual balance sheet same Indian companies publish this statement in their annual reports although they are not obliged to do so under the companies act.

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CASH FROM BUSINESS OPERATIONS:

Funds from operation under a working capital concept are based on accrual accounting procedure in that sales, whether credit or cash are recognizes as a source or working capital, but, under the cash concept of funds we are concerned with the cash basis of accounting only cash receipts from debtors against credit sales are recognized as a source of cash.

Similarly, cash purchases and cash payments to suppliers for credit purchases are regarded as the use of cash,. The same holds true for other expenses and incomes. Thus every item in the profit and loss account is altered in, converting it to cash approach. Some of the items of adjustment of the profit and loss account in the cash flow approach would be the same as in the funds statements, for instance, depreciation on plant and equipment, amortization of various deferred revenue expenses and so on. Since these items do not involve any corresponding outflow of funds (cash). They are added back to determine funds from operations in funds from operations in funds and statements. The logic that is applied in the funds statement also applies in the cash flow statement, but the analysis is required to be extended further cash is only one of the current assets and is part of the networking capital. Therefore, the changes in all of the other current assets and is in the current liabilities must be analyses in relation to their effect on cash.

The rules profit and loss account in the computation of a flow of cash from operations is summaries below.

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1.All the increases incurrent assets expect cash and degree in current liabilities, which increase working capital, decrease cash. The explanation for current liabilities is

obvious. The decrease in current liabilities takes place when they are paid in cash. For instance, decrease in creditors, bank overdrafts, bills payable dividends payable will occur due to their payment. A word of explanation is necessary to show the negative impair& of increase in current assets on cash. For instance and increase in study debtors take place because sales are greater than when the cost of goods purchased is more than the cost of goods sold increase in prepaid expenses certainly involves payment of more cash than is required for their current services.

2. From the first follows the second rule all decrease in current assets other than cash and increase in current liabilities which causes a decrease in working capital increase cash. Debtors would decrease because cash collections are more than cost of goods purchased; decrease in prepaid expenses reflects that the firm has paid less for services than are currently used.

REACTING THE FUNDS FLOW STATEMENT:

The statements of funds flow can be expanded also disclose those transactions. Which significantly influence the that increase cash, and those that decrease cash have to be classified from the income statement and the surplus statement finally, these information have to be consolidated in a funds flow statement form. Sources of funds that increase cash in a firm are: -

23

1. 2. 3. 4. 5.

A Net decreases in any assets other than cash or fixed assets. A Gross decrease in fixed assets. A Net decreases in any liability. A retirement or purchase of stock Payment of cash dividends

To avoid double counting one should compute gross changes in fixed assets by adding depreciation changes in fixed assets by adding by adding depreciation for the period to net fixed assets at the beginning of financial statement date. The residual represented the gross change in fixed assets for the assets for the period.

PREPARATION OF CASH FLOW STATEMENT:

THE principal difference between a funds flow statement and the cash flow statement lies in the amount shown as resources provided by Business operations. Therefore from the point of preparing as cash flow statement, funds from operations are to be adjusted so as obtain cash from operations. Most of the other items reported in the funds statements generally involve cash receipts or payments for example, issue of equity shares or preference shares, sale or purchases of non-current assets like

equipments building and so on. These items also appear in a cash flow statement.

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PREPARING THE FUNDS STATEMENT:

TO prepare the funds flow statement we need comparative balance sheets, income statement and additional information. We can determine the net change is working capital from the comparative balance sheet. It is the change in the figure of the working capital (increase or decrease that has to be explained. This we can do by determining the working capital provided by operations, and analyzing the changes in long-term financing Debit and equity). In flow of funds and out flow of funds method or

preparing- the funds flow statement depends essentially upon the sense in which term funds is, used. There are three concept of the term funds cash capital. Total resources concept and working capital concept. We shall now describe each of these concepts of the fund statement under the respective concepts.

CASH CONCEPT OF THE TERMFUNDS:

According to this concept the word funds is synonymous with cash. All cash receipt-its are regarded as funds inflow and all cash payment as funds out flows. This is why the term fund is used in the sense of cash funds statement under the receipts and payment account.

In order to prepare funds statement on cash basis one has to classify net balance sheet changes that take place between two points in time into changes that increase cash and changes that decrease cash. As a second stop. All the factors firm financial position, but do not increase or decrease working capital.

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Ex-: The x company converted its debentures of 30,000/- into equity shares. This is a significant event as it changes the companys debt-equity position. This transaction should be disclosed in the statement similarly, the issuance of bonus not involves working capital, but to incorporate that shares do transaction. The comprehensive

statement of charges in financial positions listing all charges is more useful as it discloses more information. The transactions not effecting working capital. The

conversion of debentures in to equity is a source of financial resources because share holders equity increase but at the same time is an application of the financial resources towards the retirement of a long-term liability.

Points of distinction between funds flow and scheduled of changes in Working capital

Point distinction 1.Meaning

of Funds flow statement

Scheduled of changes in

working capital It feels from where the funds have It shows the increase of been derived and the uses to which decrease in working capital they have been put. due to changes in current assets and current liabilities

2.Format

It is prepared both in T from or It is prepared in statement state form from only.

3.Coverage

It includes all non current items and It deeds only current items

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net result of current items

CHANGES IN WORKING CAPITAL

in balance sheet.

X Company STATEMENT OF FUNDS FLOW:

(Total Financial Resource Basis) Sources:

Financial resources from operations Sale of plants Institutions loan Issuance of ordinary-share for cash Financial resources not affection Working Capital Issuance of ordinary shares to convert debenture Issuance of ordinary shares as bonus scheme Financial resources provided

Uses: Purchases of land building Purchase of plant & Machinery Payment of cash dividend Financial resources not affecting workup Payment of debentures through conversion into equity Payment as bonus shares Financial resources applied

27

Increase in working capital

Company profile
Global Green is a multinational food company with a worldwide presence across the retail, food service and industrial segments. Global Green is engaged in the growing, manufacturing, distribution and selling of pickled cucumbers (gherkins, cornichons, pickles and relish), sweet-corn, silver skin onions, peppers (jalapeo and paprika), cherries, capers and mixed vegetables. With a business philosophy based on the implementation of the highest levels of applicable standards at every element of the chain from seed to shelf, Global Green is committed to the satisfaction of its customers. These include the world's most respected food companies and brands, leading supermarkets and the top QSR chains. Global Green is part of the Avantha Group

Global Green was originally set-up in 1992 as a joint venture between Indias Thapar group and a European partner. In 1996, the Thapar Group in a demonstration of its vision and commitment to the potential of Indian agriculture acquired 100% stake in the entity, which was then renamed as The Global Green Company Limited. Since its inception, Global Green has been the pioneer and leader of the pickled cucumber business out of India. While a growing customer base and superior manufacturing facilities have contributed to the companys steady and consistent growth, strategic acquisitions have also played an important role in this process. December 1999: Acquisition of VST Natural Products Ltd, (the foods division of Hyderabad based British American Tobacco associate VST Industries Ltd). This established Global Green as the undisputed leader of the pickled cucumber business from India. August 2006: Global Green completes the acquisition of Belgium based Intergarden N.V. and the complete Intergarden Group of Companies including the operations in Hungary, India and Intergardens stake in Floragarden, a Turkish based joint venture for

28

capers. The combined strengths of Intergarden and Global Green give rise to a truly global company, and a world leader in the condiments category. September 2008: Global Green acquires the Hungarian company, Puszta Konzerv Kft, based in Balmazujvaros, near Debrecen in Eastern Hungary. Puszta Konzerv manufactures sweet corn, peas, gherkins, mixed pickles, lecs and tomatoes. Pusztas products are a neat strategic fit with Global Greens current portfolio and their strong customer base, especially in central and eastern Europe as well as the Baltics and opens up new and significant opportunities. Global Green manufactures the highest quality products, with formulations and packaging adapted to meet specific customer and market requirements, in the following categories: Pickled Cucumbers: Pickles, Gherkins, Cornichons. Relish Corn Silverskin Onions Cherries Peppers: Jalapeo, Paprika, Others Capers Peas New product opportunities are constantly evaluated and developed on an ongoing basis. In India, Global Green offers the Tify range of products which covers several items in the condiments, sauces and conserve categories for both the retail and food service segments.

Tify the in-house brand of the Global Green Company is a premium range of gourmet processed foods available in a range of Condiments (Cornichon Gherkins and Olives) & Fillers (Jalapeos, Gherkin Bread-and-Butter Chips, Gherkin Sandwich Slices) that introduce the allure of exotic foods from distant lands. The Tify products on offer available in convenient Retail Jars & Food Service Packs(multilayered high oxygen barrier pouches and metal cans) are: Tify Gherkins: Gherkins are used mainly as fillers in sandwiches/burgers, as salad ingredients, in grilled dishes and as a snack. Premium Dill Bread & Butter chips Zesty sandwich slices Cornichons Dill Gherkin Slices Sweet Gherkin Slices

29

Tify Peppers/Chilli: Peppers/Chilli, that are sliced & pickled in vinegar, Jalapeos and Red Paprika are good pizza & sandwich toppings, as well as taste enhancers in salads & sauces. Jalapeno slices Red Paprika slices

Tify Olives: Greek and Spanish olives, Tify Olives are suitable for salads, pizza toppings, garnish for pastas & sandwich. it is also important ingredient for pesto and sauces. Black Whole Olives Green Whole Olives Kalamata Olives Pitted Mixed Olives Aegean Salad Mix Olives Sliced Black Olives

Tify Herbs,Spices and Seasoning: A Wide range of products that make great food taste better. It adds an unmatched aroma and taste to a wide variety of dishes and cuisines.

Global Green's business is based on the "seed-to-shelf" model. Attention to detail at every step of the production process is the Global Green trademark: from identifying and developing the most appropriate seed varieties, to crops grown to key specifications by a loyal contract farming network, to access to international benchmark packaging facilities and finally, on-time delivery to the customer right to the supermarket shelf. The consistently successful execution and scale-up of the seed-to-shelf model has been the most important reason for Global Green's success and the satisfaction of its customer

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INDUSTRY PROFILE

PICKLE INDUSTRYPickles happen to be one of the earliest processed food products made by man and it has a history of more than 4000 years. There have bee many famous admirers of pickles including Aristotle, Cleopatra, Julius Caesar, Napoleon Bonaparte and a host of other personalities. It is not clear whether this glamor is based on scientific experience or just personal fancy. India is considered the home to the pickle and it was Christopher Columbus who, after is voyage, brought it to the western world. India is the largest producer of pickles with a volume estimated at 65000 tons valued at Rs 5 billion and Indian pickles based on mango, lime, amla , karonda, gongura, mixed vegetables etc are exported all over the world, mainly to meet the needs of immigrant populations of Indian origin. Pickles are made either by long fermentation running to several or quick method without fermentation, using acid such as acetic acid or vinegar in sufficient quantities to lower the pH to preclude growth of harmful bacteria. Though pickle making is a traditional technology many modern scientific development in food science have been incorporated to make them safer. Pickle is supposed to be a healthy product and many consumers believe it can promote digestive health, lower cholesterol and prevent diabetes, cancer and SARS. As a technology, pickling process has served mankind admirably well in saving millions of tons of seasonal vegetables which otherwise would have gone waste at a time when modern technologies were not developed. One of the drawbacks with these type of products is the inevitable presence of high concentration of sodium chloride which has to be added during the process to stimulate growth of lactic acid producing bacteria at room temperature. At low temperature and lower salt concentrations Leuconostoc mesenteroides predominates producing mixed acids, alcohols and aroma while at 30C and higher levels of salt, Lactobacillus plantarum takes over generating mainly lactic acid. Thus pickles by fermentation will contain salt at 15-20% levels making pickle one of the high salt containing foods in the diet of Indians. It is this aspect which may ring the death knell for the industry because of the aggressive anti salt campaigns in many countries affected by life style diseases like blood pressure and kidney disorders. In UK Food Standards Agency is sparing no stones unturned to bring down salt consumption to a level of 6 gm a day. Under such compelling circumstances pickle will become the major casualty unless new technologies are developed that will drastically reduce the salt content without affecting drastically the taste and flavor of the product. Use of Nisin antibiotic is being suggested when pickles are made with under low salt level conditions but the overall sensory quality is reported to be adversely affected. Current level of consumption of salt is in the range of 9 gm to 12 gm per day by an average person, with Indians topping the list where as nutritionally daily intake need not

31

be more than 2.5 gm for an adult. With such a perception, intense efforts are bound to be mounted to bring down salt content in all products made in the organized sector of food industry. Under such an avalanche, what chance pickle industry has to weather this storm, remains to be seen. One thing is sure that unless the sodium content in pickles is drastically brought down, pickles will join the unenviable company of high sugar, high calorie and high fat foods, which are on their way out sooner or later. Domestic pickle industry has grown to the size of Rs 400 crore and is engaged in developing strategies to boost exports of this ethnic food. The pickle industry has over 2,000 units spread across the country. Most of these units are for processing chutney and fruit candy. The exports of pickles, preserve, chutney and candy in 2003 have increased to 1,58,291 tonne valued at Rs 406.17 crore. The third national seminar on achar & murabba organised by the National News Service (NNS) with the support of All India Food Processors Association and National AcharMurabba Association which concluded in Delhi defined the strategies for boosting exports. The seminar cognised the fragmented nature of the industry with low investment and called for a collective effort for brand promotion and marketing. More than 50 per cent of the units are in home scale category having installed capacity less than 10 tonne. Twenty to 25 per cent of the units are cottage industries having installed capacity of 10 to 50 tonne and 15 to 20 per cent of the units are in small scale category.. .

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DATA ANALYSIS AND INTERPRETATION

CHANGES OF WORKING CAPITAL STATEMENT (WCS) (For the year ended 2007-2008) Table no.: 1 In Lakhs PARTICULARS Current Assets: 2007 2008 INCREASE DECREASE

Cash and bank balances Trade and other receivables Inventories

404.07 5035.42 5623.48

865.78 5752.65 7277.55

461.71 717.23 1654.07

TOTAL:

11062.97

13895.98

Current Liabilities:

Trade payables Differed revenue expenses

6430.75 1122.49

8481.44 518.35

604.14

2050.69 -

TOTAL:

7553.24

8999.79

CA-CL Increase in working capital

3509.73 1386.46

4896.19 1386.46

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TOTAL:

4896.19

4896.19

3437.15

3437.15

FUNDS FROM OPERATIONS STATEMENT (For the year ended 2007-2008) Table no.: 2 In Lakhs PARTICULARS AMOUNT Profit before tax and Extra ordinary items Depreciation Bad debts written off Loss on discard Assets Interest paid Miscellaneous expenses 1658.46 1873.84 1.30 0.85 2708.51 288.87 Funds from operation 5940.48 PARTICULARS AMOUNT Profit on sale of investments 87.45 Profit on sale of Assets Income from Investments Interest received 13.92 0.03 489.95

TOTAL

6531.83

TOTAL

6531.83

34

FUNDS FLOW STATEMENT (For the year ended 31st march 2008) Table no.: 3 In Lakhs SOURCES Capital work in progress Sale of fixed assets Sale of investments Income from Investments Interest received Extinguishments of Investment in CPL 2592.92 AMOUNT (In Rs) 170.60 158.50 886.36 0.03 489.95 APPLICATIONS Purchase of fixed assets AMOUNT (In Rs) 1421.53

Assets transferred from CPL 8551.52 Good will consequences to amalgamation Redemption of preferential Shares Repayment of borrowings Dividends paid 3985.15 371.89 163.33 1933.97

Issue of equity and Preferential shares Borrowings taken from CPL Proceeds from borrowings Capital redemption from Reserve of CPL Profit CPL for half year Funds from operations 8.00 340.81 5940.48 548.00 8785.74 1050.34

Interim dividend on Preference shares Tax on interim preference dividend Interest paid Income tax paid Increase in working capital 15.13 2708.51 285.90 1386.46 148.34

TOTAL

20971.73

TOTAL

20971.73

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INTERPRETATION:

In the year 2006 and 2008 the working capital statement shown that Rs 1386.46 lakhs has been raised due to the changes in inventories and payables in current assets.

In current assets of inventory has appreciated to Rs 1654.07 Lakhs and trade payables of current liabilities has been increased to Rs2050.69 lakes.

The statements has shown the funds which are coming from operating and nonoperating and non-operating activities are analyzed in a table 1 from this table 5940.49 lakes are increased from operations. It is due to increase in the payment of depreciation.

During the year company invested its major amount in borrowings taken from CPL at Rs 8785.74. The huge amount invested in assets transferred from CPL. at 8551.53

CHANGES OF WORKING CAPITAL STATEMENT (WCS) (For the year ended 2008-2009) Table no.: 4 In Lakhs PARTICULARS Current Assets: 2008 2009 INCREASE DECREASE

Cash and bank balances Trade and other receivables Inventories

8654.78 5752.65 7277.55

563.71 5195.63 7977.21

699.66

302.07 557.02 -

36

TOTAL:

13895.98

13736.55

Current Liabilities:

Trade payables Differed revenue expenses

8481.44 518.35

7649.63 383.51

831.81 134.84

TOTAL:

8999.79

8033.14

CA-CL Increase in working capital

4896.19 807.22

5703.41 807.22

TOTAL:

5703.41

5703.41

1666.31

1666.31

37

FUNDS FROM OPERATIONS STATEMENT (For the year ended 2008 -2009) Table no: 5 In Lakhs PARTICULARS AMOUNT Profit before tax and Extra ordinary items Depreciation Bad debts written off Loss on discard Assets Miscellaneous expenses Written off Provisions for doubtful debts Provisions for Diminution of Investments Interest paid 11.18 2376.78 Funds from operation 6250.07 297.43 60.00 2235.55 1921.66 1.83 0.67 PARTICULARS AMOUNT Profit on sale of investments 76.78 Profit on sale of Assets Income from Investments Interest received 192.20 130.93 255.12

TOTAL

6905.10

TOTAL

6905.10

FUNDS FLOW STATEMENT

38

(For the year ended 31st march 2009) Table no: 6 In Lakhs SOURCES Capital work in progress Sale of fixed assets Sale of investments Income from Investments Interest received Proceeds from borrowings Funds from operations AMOUNT (In Rs) 68.43 207.54 3408.56 130.93 255.12 2274.27 6250.07 APPLICATIONS Purchase of fixed assets Purchase of investments Redemption of preferential Shares Repayment of borrowings Dividends paid Interim dividend on Preference shares Interest paid Income tax paid Increase in working capital 42.50 2376.78 142.92 807.22 163.33 2653.05 361.84 AMOUNT (In Rs) 1881.28 4166.00

TOTAL

12594.92

TOTAL

12594.92

39

INTERPRETATION:

During the year 2008-2009 the working capital statement show that 807.22 have been raised due to changes in inventories and trade payables. Incurrent assets inventories has appreciated to Rs 699.66 lacks and C.I. has

Trade payable of C.I has been decreased 831.81 lacks. From that we can conclude 41.77% of W.C has decreased in this year.

The statement has shown that the funds which are coming from operating & nonoperating activities are analyzed the table 5 from this table we could find out 6250.07 lacks of funds from operations. It has increase 4.95% when compared with 2006 year. Funds from operation have increased 5.21% during the year 2007-2008.

During the period the huge amount used for purchase of investment of Rs 41660 lacks and the huge amount came from sale of investment at Rs 3408.56 %. The sources and application of funds flow are decreased to 38.14% during this period.

40

CHANGES OF WORKING CAPITAL STATEMENT (WCS) (For the year ended 2009-2010) Table no.: 7 In Lakhs PARTICULARS Current Assets: 2009 2010 INCREASE DECREASE

Cash and bank balances Trade and other receivables Inventories

563.71 5195.63 7977.21

794.91 5643.62 8703.94

231.2 447.99 726.73

TOTAL:

13736.55

15142.47

Current Liabilities:

Trade payables Differed revenue expenses

7649.63 383.51

7644.79 340.89

4.84 42.62

TOTAL:

8033.14

7985.68

CA-CL Increase in working capital

5703.41 1453.38

7156.79 1453.38

TOTAL:

7156.79

7156.79

1453.38

1453.38

41

FUNDS FROM OPERATIONS STATEMENT (For the year ended 2000 -2010) Table no.: 8 In Lakhs PARTICULARS AMOUNT Profit before tax and Extra ordinary items Depreciation Bad debts written off Loss on discard Assets Miscellaneous expenses Written off Interest paid 295.90 1653.31 Funds from operation 5848.28 2662.16 2001.55 37.32 3.04 PARTICULARS AMOUNT Profit on sale of investments 88.19 Profit on sale of Assets Income from Investments Interest received 44.74 73.11 599.02

TOTAL

6653.28

TOTAL

6653.28

FUNDS FLOW STATEMENT

42

(For the year ended 31st march 2010) Table no.: 9 In Lakhs SOURCES Sale of fixed assets Sale of investments Income from Investments Interest received Proceeds from borrowings Funds from operations AMOUNT (In Rs) 60.64 1959.92 73.11 599.02 4727.85 5848.22 APPLICATIONS Purchase of fixed assets Purchase of investments Capital work in progress Redemption of preferential Shares Repayment of borrowings Dividends paid Interim dividend on Preference shares Premium paid Tax on interim preference Dividend Interest paid Income tax paid Increase in working capital 2.40 1653.31 225.03 1453.38 18.70 219.40 163.33 5833.84 333.61 AMOUNT (In Rs) 2190.30 1018.87 156.59

TOTAL INTERPRETATION:

13268.76

TOTAL

13268.76

43

During the year 2009-10the working capital statement shows an increasing working capital of 1453.38 lacks. It was increased 80.04% from 41.77% during the period.

The table 8 shows funds from operating 5848.22 during the year 2007-2008 . Funds from operation ratio have increased to 6.42% from 5.21% during this period.

During the period the huge amount used for repayment of borrowing at Rs 5833.84 laces. The majority of funds came from funds from operations of Rs 5833.22 lacks.

The sources and application is increased 5.35% in this period.

CHANGES OF WORKING CAPITAL STATEMENT (WCS) (For the year ended 2010-2011)

44

Table no.: 10 In Lakhs PARTICULARS Current Assets: 2010 2011 INCREASE DECREASE

Cash and bank balances Trade and other receivables Inventories

794.91 5643.62 8703.94

612.33 5995.57 8624.29

351.95 -

182.58 79.65

TOTAL:

15142.47

15232.19

Current Liabilities:

Trade payables Differed revenue expenses

7644.79 340.89

8390.28 215.78

125.11

745.49 -

TOTAL:

7985.68

8606.06

CA-CL Increase in working capital

7156.79

6626.13 530.66 530.66

TOTAL:

7156.79

7156.79

1007.72

1007.72

FUNDS FROM OPERATIONS STATEMENT (For the year ended 2010 -2011)

45

Table no.: 11 In Lakhs PARTICULARS AMOUNT Profit before tax and Extra ordinary items Depreciation Bad debts written off Loss on discard Assets Miscellaneous expenses written off Interest paid 215.78 1284.04 Funds from operation 6671.57 3391.96 2062.86 23.57 1.32 PARTICULARS AMOUNT Profit on sale of investments 182.73 Profit on sale of Assets Income from Investments Interest received 9.42 9.65 106.16

TOTAL

6979.53

TOTAL

6979.53

FUNDS FLOW STATEMENT (For the year ended 31st march 2011)

46

Table no.: 12 In Lakhs SOURCES Sale of fixed assets. Sale of investments Income from Investments Interest received Proceeds from borrowings AMOUNT (In Rs) 40.72 9060.35 192.38 106.16 4776.32 APPLICATIONS Purchase of fixed assets Purchase of investments Capital work in progress Repayment of borrowings AMOUNT (In Rs) 930.03 8038.54 6473.00 4727.12

Dividends paid on preference shares Interest paid Income tax paid 467.06 1284.04 733.65

Advanced Application money from promoters Money received towards Equity share capital Share premium issued Decrease in working capital Funds from operations 0.11 0.17 530.66 6671.57 1275.00

TOTAL

22653.44

TOTAL

22653.44

INTERPRETATION:

47

In the above 10 table shows decreasing W.C during the period due to change in current assets & current liabilities. Current assets of trade and other receivable are trade payable are also increased, these to are effected to decline W.C to 63.46% From 80.04% during this period.

The table 11 shows funds from operation we can concluded that Rs 6671.57 lacks it has increased operations ratio to 14% from 6.42% during this period.

During the year 2010-2011 the company invested its major amount in purchasing investment and used huge amount for sale of investments i.e. purchase of investments Rs 8038.54 lacks. Sale of investments Rs 9060.35 lacks. Funds from operations amount to 6671.57 lacks. The source and applications of Rs 22563.44 during this period.

CHANGES OF WORKING CAPITAL STATEMENT (WCS) (For the year ended 2011-2012)

48

Table no.: 13 PARTICULARS Current Assets: 2011 2012 In Lakhs INCREASE DECREASE

Cash and bank balances Trade and other receivables Inventories

612.33 5995.57 8624.29

347.36 6276.90 4204.44

281.33

264.97 4419.85

TOTAL:

15232.19

10828.70

Current Liabilities:

Trade payables Differed revenue expenses

8390.28 215.78

9194.29 91.39

124.39

804.01

TOTAL:

8606.06

9285.68

CA-CL Decrease in working capital

6626.13

1543.02 5083.11 5083.11

TOTAL:

6626.13

6626.13

5488.83

5488.83

FUNDS FROM OPERATIONS STATEMENT (For the year ended 2011 -2012)

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Table no.: 14 In Lakhs PARTICULARS AMOUNT Profit before tax and Extra ordinary items Depreciation Bad debts written off Loss on discard Assets Miscellaneous expenses Written off Interest paid Provisions for doubtful debts 146.36 1045.65 30.82 Funds from operation 7108.79 4220.14 2124.35 101.32 0.63 PARTICULARS AMOUNT Profit on sale of investments Profit on sale of Assets Income from Investments Interest received 138.59 12.52 409.37

TOTAL

7669.27

TOTAL

7669.27

FUNDS FLOW STATEMENT (For the year ended 31st march 2012) Table no.: 15 In Lakhs

50

SOURCES Sale of fixed assets. Sale of investments Income from Investments Interest received Proceeds from borrowings

AMOUNT (In Rs) 175.47 12.52 409.37 21925.53

APPLICATIONS Purchase of fixed assets Purchase of investments Capital work in progress Payment of borrowings Dividends paid on Preference shares

AMOUNT (In Rs) 19037.18 20452.25 3637.69

Advanced Application money from promoters Money received towards Equity share capital Share premium issued Decrease in working capital Funds from operations 1198.97 10216.38 5083.11 7108.79 -

339.51 1045.65 342.86 of 1275.00

Interest paid Income tax paid Advanced application

money from promoters paid

TOTAL

46130.14

TOTAL

46130.14

INTERPRETATION:

In the above 13 table shows decreasing W.C during the period due to changes in current assets & current liabilities. Current assets of trade and other receivable are

51

increased and trade payables are also increased, these to are affected to decline W.C to 5083.11 from 530.16 during this period. The table 14 shows funds from operations we can conclude that Rs 7108.79 lacks. It has increased operations ratio to 14.745% from 14% during this period. During the year 2011-2012 the company invested its major amount in purchasing fixed assets and used huge amount for process for borrowing i.e. purchase of fixed assets Rs 19037.18 lacks, proceed for borrowing Rs 21925.53 ( lacks). Funds from operations amount to 7108.79 lacks. The sources and applications of Rs 46130.14 during this period.

INCREASE/DECREASE IN WORKING CAPITAL (WC) Table no: 16 In Lakhs

52

PARTICULARS 2008

2009

2010

2011

2012

INCREASE OR DECREASE IN WORKING CAPITAL +1386.46 +807.22 +1453.38 -530.66 -5083.11

INTERPRETATION:

The above 16 table showing the changes in working capital decreasing year by year from last five years except 2008. In 2011-12 the working capital highly changed compare to the last five years.

53

INCREASE/DECREASE IN WORKING CAPITAL STATEMENT

CHART-I

54

FUNDS FROM OPERATION STATEMENT Table no: 17 In Lakhs PARTICULARS 2008 2009 2010 2011 2012

FUNDS OPERATIONS

FROM 5940.49

6250.07

5848.22

6671.57

7108.79

INTERPRETATION:

The above 17-table showing the funds from operations is increasing year by year. But in 2010 the funds from operations decreased compare to remaining years.

FUNDS FROM OPERATION STATEMENT

55

CHART-II

FINDINGS

SUGGESTIONS CONCLUSION

56

FINDINGS

From the above study of the financial management (Funds flow analysis) of the APPM Ltd., I found the following points, during my project study.

By observing the annual reports of the company I found that the sales of the company are gradually increasing year by year.

1.

In 2011-12 there is a decrease of working capital when compared with last 5 years sales good.

2.

Profits increased in 2011-2012.

3.

Gross total income grew from Rs.498.04 crores in 2007-2008 to Rs.503.85 crores in 2011-2012.

4.

Profit before tax registered a 27% growth over the previous fiscal year.

5.

The company net worth increased from Rs.193.10 crores in 2007-2008 to Rs.216.01 crores in 2011-2012.

6.

The company reserves increased over the previous fiscal year from Rs.191.07 crores to Rs.208.37 crores a growth of 9.05%.

57

7.

The funds have increased to Rs. 22653.44 lacks from 20971.74 lacks during 2007-2011.It have increased at 7.42% from 2004 in my observation.

8.

The funds from operation increased year by year from 2008-09 to 2011-12.

9.

The organization got sources from borrowings and share premium issued.

10.

During the year 2011-2012working capital has decreased by Rs.5083.11 lacks, which shows a favorable trend.

58

SUGGESTIONS

1.

The company should decrease the amount of the current assets for decrease the working capital.

2.

The funds are used in three activities such as operating, investing and financing. The percentage of funds should be increased in three activities for stabilized these profits.

3.

The company should pay constant dividend to the preference shareholders.

4.

The company must be maintaining reserve and surplus A/C to favorable position.

5.

The depreciation should be decrease in the future.

6.

The company increased purchase of fixed assets from the last five years. The same should be maintained in future if the favorable condition exist for the company.

59

CONCLUSION

Conclusion:Every enterprise needs Funds flow analysis for effective running of the business activities. Funds flow analysis is a way of managing business and industry. It emphasizes that management should anticipate problems and difficulties. Advance decision should be taken for the course of activities during the forthcoming budget period. Funds flow analysis denotes a formal system based on the concept of budgeting. Funds flow analysis is essential for policy planning and control. It also acts as an instrument of coordination. The main objective of Funds flow analysis is to ensure funds required . The requirements and expected performance of the enterprise are anticipated. Lanco Infratech Ltd has introduced various systems of Funds flow analysis in order to achieve the future objectives of the organization

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BIBLIOGRAPHY

Biblography:1Books: Management Accounting Principles and Practice, Eighth Edition, R.K. Sharma & Shashi K. Gupta. Advanced Cost Accounting , Vasisth and Suxena Financial Management, Ninth Edition, I. M. Pandey.

Financial Management, Sixth Edition, Prasanna Chandra.

Financial Management, Fifth Edition, MY. Khan and PK. Jain.

Advance Accounting, R.L. Gupta.

Management and organizational Behavior, P.Subba Rao Annual Reports of the company.

2Websites: www.golobalgreencompany.com www.google.com

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