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M.D.

UNIVERSITY

PROJECT REPORT
ON

CASH FLOW

In the partial fulfillment of Post-Graduation Degree of

OF BUSINESS ADMINISTRATION

Submitted to Submitted By
Dr. Nittu Nimbrani Shakti
Asst. Professor M.B.A5.10
IMSAR MDU ROHTAK Roll No. 876

1
DECLARATION

I SHAKTI a student of MBA 10th semester, Master of Business administration university

Roll No. under the Maharshi Dayanand University, Rohtak declare that the project Report
entitled “:CASH FLOW”
Being submitted by me is an original piece of work done by me under the supervision
of the matter presented has not been copied from any other existing report. However, extracts of any
Literature which has been used for this report has been duly acknowledged providing details of such
literature in the references. Also, this project report has not been submitted for the fulfillment of the
requirements for the award of any other degree or Diploma to any other college/institution/University.

In case, any matter presented is found plagiarized at a later date. I shel be solely responsible for that.

Signature

Name SHAKTI

University, Roll No.

University, Registration No. 1418220069

Dated:

Place :

Countersigned

Signature

Name & Designation of the Faculty Supervisor Dr. NITTU NIMBRANI

IMSAR, MDU Rohtak

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INDEX
Chapter PARTICULARS Page no:

Chapter 1 Introduction of the topic


 Classification of cash flow
 Method of preparing the cash flow
statement
 Treatment of other items
 Important terms

Chapterr 2 Objective of the study

Chapter 3 Review of Literature

Chapter 4 Research design


 Research methodology
o Primary data
o Secondary data
 Plan of analysis
o Method of analysis
o Tools used
 Limitations of study

Chapter 5 Analysis and interpretation

Chapter 6 Findings, suggestions and conclusion

Bibliography

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CHAPTER-1

INTRODUCTION OF THE TOPIC

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In financial accounting, a cash flow statement or statement of cash flows is a financial statement that
shows a company's incoming and outgoing cash during a time period. All three statements are
arranged from the same accounting information, but each statement serves its individual function. The
statement of cash flow reports the movement of cash into and out of your business in a given year.
Cash is the lifeblood of your company. The cash flow statement reports your business' sources and
uses of cash and the beginning and ending values for cash and cash equivalents each year. It also
includes the combined total change in cash and cash equivalents from all sources and uses of cash.

Cash flow statements format planning involves forecasting and tabulating all significant cash inflows
and analyzing the timing of expected payments in detail. We have highly skilled cash flow financing
professionals prepare comprehensive periodic cash flow projections that can assist you in tasks such as
budgeting, business planning and fund raising.

1 What Does Cash Flow Mean?


1. A revenue or expense stream that changes a cash account over a given period. Cash
inflows usually arise from one of three activities - financing, operations or investing - although
this also occurs as a result of donations or gifts in the case of personal finance. Cash outflows
result from expenses or investments. This holds true for both business and personal finance.
2. An accounting statement called the "statement of cash flows", which shows the amount of
cash generated and used by a company in a given period. It is calculated by adding noncash
charges (such as depreciation) to net income after taxes. Cash flow can be attributed to a
specific project, or to a business as a whole. Cash flow can be used as an indication of a
company's financial strength.

Cash flow Plan is a range of powerful, easy-to-use software packages for preparing
comprehensive monthly cash flow projections for 12 months ahead. You can use it for cash flow
planning, budgets, business planning, fund raising etc. for young & established businesses of all sizes
and types. It incorporates a roll-forward facility to help you to speedily update the projections every
month. More powerful versions also include a tool for consolidating projections.

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Cashflow Plan will help plan your business's cash requirements, improve control over cashflows
and conserve cash resources. It will be especially useful if you need to forecast cashflows in the
context of:

 1 tight cash/profit margins

 2 limited financial resources

 3 planning for growth or radical change

 4 compiling cash budgets

 5 preparing business improvement plans.

2. When to Use Cashflow Plan

Cashflow Plan is a software tool for preparing cashflow projections for a business. It will be
especially useful to your business if you need to improve its future net cashflow. Cashflow Plan will
help you to plan cash requirements and thereby improve control over your business's cashflows and to
conserve its cash resources.

In addition to compiling detailed monthly cash flow forecasts, Cash flow Plan automatically generates
fully-integrated income statements (profit and loss accounts) and balance sheets on a monthly basis.
This makes Cash flow Plan very suitable for many other purposes where you may need 12-month
projections:

 1 preparing shorter term business plans,

 2 exploring development options,

 3 constructing budgets,

 4 assessing strategies,

 5 raising external finance and so on ..

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CASHFLOW:Cashfollowmeaninflowandoutflowofcash.Cashflowisthe movementof
moneyintooroutofabusiness,project,orfinancialproduct.Itisusually
measuredduringaspecified,limitedperiodoftime.Measurementofcashflowcanbeused
forcalculatingotherparametersthatgiveinformationonacompany'svalueandsituation.
Cashflowcanbeused,forexample,forcalculatingparameters:itdisclosescashmovements
overtheperiod.Acashflowstatementisafinancialreportthatdescribesthesources ofa
company'scashand howthatcashwas spentoveraspecifiedtimeperiod.Itdoes
notinclude non-cashitemssuch as depreciation.Thismakes itusefulfordetermining
the short-term viability of acompany, particularlyitsabilitytopaybills. Becausethe
managementofcashflowissocrucialforbusinessesandsmallbusinessesin
particular,mostanalystsrecommendthat
anentrepreneurstudyacashflowstatementatleasteveryquarter.
Itshouldbenotedthatcashflowstatementdealswiththeflowofcashfundbut
not considermovement of cash bank balance andcash equivalent.

Cash fund:As per (AS-3) issued bytheICWA ofIndia, the term cashincludes:
(i) Cash in hand

(ii) Demand deposited withbank

Accountingstandard 3 (AS-3) cashflowstatement

The 'applicability' paragraphs of AS 3 stand modified as under:


"ThefollowingisthetextoftherevisedAccountingStandard(AS)3,'CashFlow
Statements',issuedbytheCounciloftheInstituteofCharteredAccountantsofIndia.
ThisStandardsupersedesAccountingStandard(AS)3,'ChangesinFinancialPosition',
issuedinJune,1981.Intheinitialyears,thisaccountingstandardwillbe
recommendatoryincharacter.Duringthisperiod,thisstandardisrecommendedforuse

7
bycompanieslistedonarecognisedstockexchangeandothercommercial,industrialand
business enterprises in the public and privatesectors.

AccountingStandard(AS)3,'CashFlowStatements'(revised1997),issuedbythe

CounciloftheInstituteofCharteredAccountantsofIndia, comesinto effectinrespectof


accountingperiodscommencingonorafter1-4-1997.ThisStandardsupersedes
AccountingStandard(AS)3,'ChangesinFinancialPosition',issuedinJune1981.This
Standardismandatory innatureinrespectofaccountingperiodscommencingonorafter 1-4-
20041fortheenterpriseswhichfallinanyoneormoreofthefollowingcategories, at anytime
duringthe accountingperiod:

i. Enterprises whose equityor debt securitiesare listed whether inIndia or outside


India.
ii. Enterprises whichare in the process of listingtheirequityor debt securitiesas
evidenced bythe board of directors' resolution in this regard.
iii. Banks includingco-operative banks.
iv. Financial institutions.
v. Enterprises carryingon insurancebusiness.
vi. All commercial, industrial and business reporting enterprises, whose turnover for
the immediatelyprecedingaccountingperiod on the basis of audited financial
statements exceeds Rs. 50 crores, Turnover doesnot include 'other income'.
vii. All commercial, industrial and business reporting enterprises havingborrowings,
includingpublic deposits, in excess of Rs. 10 crores at anytimeduringthe
accountingperiod.
viii. Holdingand subsidiaryenterprises of anyone ofthe above at anytime duringthe
accountingperiod.

The enterprises which donot fall in anyof the above categories are encouraged, butare
not required, to applythis Standard.
Where an enterprise has been covered in anyoneor moreof the abovecategoriesand
subsequently,ceases to be so covered, the enterprise will not qualifyforexemption from
application of this Standard, until the enterpriseceases to be covered inanyof the above
categoriesfortwo consecutiveyears.

8
9
Where an enterprise has previouslyqualified for exemption from application of this

Standard (beingnot coveredbyanyof the above categories)but no longerqualifies for


exemption in the current accountingperiod, this Standard becomes applicable from the
current period. However,the correspondingprevious period figures neednot be
disclosed.An enterprise,which, pursuant to the aboveprovisions, does not presenta cash
flowstatement, should disclose the fact.

The followingis the text of the AccountingStandard."


The above modifications come into effect in respect of accountingperiodscommencing
on or after1-4-2004. Accordingly, the announcement issued bythe Counciltitled as
'AccountingStandard (AS) 3, Cash Flow Statements MadeMandatory',published in the
December2000 issue of theInstitute's Journal (page 65) stands withdrawnin respect of
accountingperiodscommencingon or after1-4-2004.

Classificationof cash flow

Accountantstandard(AS-3)requiresthatcashflowstatementshouldcashflowduringthe
period classification byoperating, investing and financingactivities.
Operatingactivities
Operatingactivitiesaretheprincipleactivitiesoftheenterprise.Anaccountingitem
indicatingthemoneyacompanybringsinfromongoing,regularbusinessactivities,suchas
manufacturingandsellinggoodsorprovidingaservice.Cashflowfromoperatingactivities
doesnotincludelong-termcapitalorinvestmentcosts.Itdoesincludeearningsbefore interest and
taxes plus depreciation minus taxes.

Alsocalledoperatingcashflowornetcashfromoperatingactivities,itcanbecalculatedas

follows.

Cash Flow from OperatingActivities =EBIT+ Depreciation – Taxes

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Some examples of cash flow from operatingactivities are:

1.Cashreceiptsfromthesaleofthegoodsandtherenderingofservicesusually from a
major share of cash inflows.
2.Cash receipts from royalties fees, commission andother revenues.

3.Cashpaymentofsupplierforgoodsand services,suchas paymentofexpenses like


lighting and power,rent, insurance etc.
4.Cash payment of thewages and salaryto theemployees.

Operatingactivity

Theownersormanagersofthebusinessusetheinitialfundstobuyequipmentor
otherassetstheyneedtorunthebusiness.Inotherwords,theyinvestit.Thepurchase
ofproperty,plant,equipment,andotherproductiveassets isclassifiedasaninvesting
activity.Sometimesacompanyhasenoughcashofitsownthatitcanlendmoneyto
anotherenterprise.This,too,wouldbeclassifiedasaninvestingactivity.Generally,
anyitemthatwould beclassifiedonthebalance sheetasalong-termassetwouldbea
candidateforclassificationas aninvestingactivity.

Financing activities
Nowthecompanycanstartdoingbusiness.Ithasprocuredthefundsandpurchased
theequipmentandotherassetsitneedstooperate.Itstartstosellmerchandiseor
servicesandmakepaymentsforrent,supplies,taxes,andalloftheothercostsof
doingbusiness.Allofthecashinflowsandoutflowsassociatedwithdoingthework
forwhichthecompanywasestablishedwouldbeclassifiedasanoperatingactivity. Ingeneral,ifan
activity appearson thecompany's incomestatement,itis acandidate
fortheoperatingsectionofthecash flowstatement.

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METHODSOFPREPARINGTHECASHFLOWSTATEMENT

InNovember1987,theFinancialAccountingStandardsBoard(FASB)issueda"Statementof
FinancialAccountingStandards"whichrequiredbusinessestoissueastatementofcashflow
ratherthanastatementofchangesinfinancialposition.Therearetwomethodsforpreparing
andpresentingthisstatement,thedirectmethodandtheindirectmethod.TheFASB
encourages,butdoesnotrequire,theuseofthedirectmethodforreporting.Thetwomethods
ofreportingaffectthepresentationoftheoperatingsectiononly.Theinvestingandfinancing
sectionsarepresentedinthesame wayregardlessofpresentation methods.

1.DirectMethod

Thedirectmethod,alsocalledtheincomestatementmethod,reportsmajorclassesof operating
cashreceiptsandpayments.Usingthismethodofpreparingcashstatementstartswithmoney
receivedandthensubtractsmoneyspent,tocalculatenetcashflow.Depreciationisexcluded
altogetherbecause,althoughitisanexpensethataffectsnetprofits,itisnotmoneyspentor received.

2.IndirectMethod
Thismethod,alsocalledthereconciliationmethod,focusesonnetincomeandthenetcash

flowfromoperations.Usingthismethodonestartswithnetincome,addsbackdepreciation,
thencalculateschangesinbalancesheetitems.Theendresultisthesamenetcashflow
producedbythedirectmethod.Theindirectmethodaddsdepreciationintotheequation
becauseitstartedwithnetprofits,fromwhichdepreciationwassubtractedas anexpense.

Regardlessofwhetherthedirectortheindirectmethodisused,theoperatingsectionofthe cashflow
statement endswith netcash provided(used) byoperating activities. Thisis themost
importantlineitemonthecashflowstatement.Acompanyhastogenerateenoughcashfrom
operationstosustainitsbusinessactivity.Ifacompanycontinuallyneedstoborroworobtain
additionalinvestorcapitalizationtosurvive, thecompany'slong-termexistenceis injeopardy.

KARNATAKA POWER CORPORATION LIMITED CASHFLOW ANALYSIS


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FINANCINGANDINVESTINGSECTIONS

Thecashflows,inandout,resultingfromfinancingandinvestingactivitiesarelistedinthe

same waywhetherthedirectorindirectmethodofpresentationisemployed.

CASHFLOWS FROMINVESTING

Themajorlineitemsinthissectionofthecashflowstatementareasfollows:
 CapitalExpenditures.Thisfigurerepresentsmoneyspentonitemsthatlastalongtimesuch
asproperty,plant,andequipment.Whencapitalspendingincreases,itoftenmeansthe companyis
expanding.

 InvestmentProceeds.Companieswilloftentakesomeoftheirexcesscashandinvestitinan
efforttogetabetterreturnthantheycouldinasavingsaccountormoneymarketfund.This figure
shows howmuch the companyhas made orloston these investments.

 PurchasesorSalesofBusinesses.Thisfigureincludesanymoneythecompanymadefrom
buyingorsellingsubsidiarybusinessesandwillsometimesappearinthecashflowsfrom
operatingactivities section, rather than here.

CASHFLOWS FROMFINANCING

Themajorlineitemsinthissectionofthecashflowstatementincludesuchthings as:

 DividendsPaid.Thisfigureisthetotaldollaramountthecompanypaidoutindividendsover

the specified time period.

 Issuance/PurchaseofCommonStock.Thisisanimportantnumberbecauseitindicateshowa
companyisfinancingitsactivities.New,rapidlygrowingcompanieswilloftenissuenew
stockanddilutesthevalueofexistingsharesinsodoing.Thispracticedoes,however,give

13
companycashforexpansion.Later,whenthecompanyismoreestablisheditwillbeina position to
buyback its own stock and in this wayincrease the valueof existingshares.

 Issuance/RepaymentsofDebt.Thisnumbertellsyouwhetherthecompanyhasborrowed
moneyduringtheperiodorrepaidmoneyitpreviouslyborrowed.Borrowingisthemain alternative
to issuingstock as awayforcompaniesto raisecapital.

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Thecashflowstatementisthenewestofthethreefundamentalfinancialstatementsprepared
bymostcompaniesandrequiredtobefiledwiththeSecuritiesandExchangeCommissionby
allpubliclytradedcompanies.Mostofthecomponentsitpresentsarealsoreported,although
ofteninadifferentformat,inoneoftheotherstatements,eithertheIncomeStatementorthe
BalanceSheet.Nonetheless,itoffersthemanager,investor,lender,andsupplierofacompanya
viewintohow itisdoinginmeeting itsshort-termobligations,regardlessofwhether ornotthe
companyis generatingincome

TREATMENTOFOTHERITEMS

i. Interestanddividend

a)Incaseoffinancingenterprise,cashflowfrominterestpaidandinterest
dividendreceivedshouldbetreatedascashflowfromoperatingactivities. Dividend
paid should be classified as cash flow from financing activity.
b)Inthecaseofotherenterprises,cashflowsarisingfrominterestanddividend
paidshouldbeclassifiedascashflowsfromfinancingactivitieswhileinterest and
dividend should be classified as cash inflowfromfinancing activity.

Netprofitisadjustedfornonoperatingexpensesandincomeforcalculatingoperat
ingprofitasshownbelow:

Netprofit xxx
Add:nonoperating expenses xxx
Less:non-operating income xxx
Netoperatingprofit xxx

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IMPORTANTTERMS

1.Incometax:cashflowarisingfromincometaxshouldbeclassifiedasflowsfromoperatingactivitiesu
nlesstheycanbespecialisedidentifiedfinancingandinvesting
activity.Forexample:capitalgaintaxonsaleoflandcanbeidentifiedwithinvestingactivitiesandtherefo
reinthecashflowstatement,itshouldbeshown asoutflowfrom investingactivity.
2.Extraordinaryitems:thecashflowassociatedwithextraordinaryitemsshouldbe
classifiedasarisingfromoperating,investingandfinancingasappropriateand
separatelydisclosed.Forexample:legalclaimcostofwinningalawsuitorlottery, receipt
ofclaim from aninsurance companyetc.
3.Non-cashtransactions:therearecertaintransactionswhichdonotincludeanycash
outflowalthoughtheyaffectthecapitalandtheassetsoftheenterprise;theyare excluded
from cash flowforobvious reason. Examples of non cash transaction are:
a)Acquisition of asset byissuing shares or
debentures.b)Conversion of non-convertible debentures
into shares. c)Acquisition of fixed asset like machineryon
credit

PREPARATION OFCASHFLOW STATEMENT

Preparation ofcashflowstatement of EME Technologies


issimilartofundflowstatement.Infactthebasicdifference
arisesfromthedefinitionoffund.Infundflowstatement,Fundmean‘networking
capital’whileincashflowstatementitmeans‘cash’AS-3hasnotprescribedanyspecific
formatforcashflowstatementbutSEBIhasapprovedcashflowstatementtobepreparedin the
followingform

Performaof cash flowstatements

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1.Cash flow
fromoperatingactivitiesBeforetaxand
Adjustment for:
extra ordinaryitems
Depreciation
Interest income
Dividend income
Interest expense
Foreignexchange loss
Operatingprofit before changingin working capital
Adjusted capital before working capital
Costgeneration from orused in operation beforetax

17
Incometaxpaid
Cash flow before extra ordinaryitems
Net cash from (orused in) operatingactivities
2. cashfrominvestmentactivity
Purchase of fixed assets
Proceeds ofsale of fixedassets
Interest and dividendreceived activity
Net cash from (orused) in investment activities

3.Cash flow fromfinancing activities


Proceedsfromissue ofshares/debenture
Proceeds from longterm borrowing
Repayment of longtermborrowing
Interest paid
Dividend paid
Net cash from (orused in) financingactivities
Net increase ordecrease in cash and cash equivalent

Cash and cash equivalentat the beginningof theyear


Cash and cash equivalentat the end of the period

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OBJECTIVEAND USESOFCASHFLOW STATEMENT

Usefulincashplanning:acashflowstatementisveryusefultothe
managementinbyprovidingabasictoevaluatetheabilityofacompanytogenerate
cash.Acashflowstatementispreparedonanestimatedbasisforthenextaccounting
periodsenablethemanagementtoknowhowmuchcashcanbegeneratedinternally
andhowmuchitshouldarrangefromoutside.Suchestimatedamountsareusedfor preparing
a cash budget.
Assessescashfromoperatingactivity:cashflowstatementprovides
informationaboutcashgeneratedfromoperation of EME
Technologies.Itprovidesexplanationforthe
differencenetprofitandcashfromoperation.Cashprovidedbyoperatingactivityis
veryimportant to assess the cash generated byinternal sources.

Paymentofdividend:Decisiontopaythedividendcannotbebasedonthenet
profitonlyavailabilityofprofitintheformofthecashisalsoimportantfor
distributiondisbursement.Thus,cashprovidedbyoperatingactivitiesassume
importancefordeclaration of dividend.

Cashfrominvestingandfinancingactivities:acashflowstatementnot
provideinformationonlyaboutcashbyoperatingactivitybutalsobynon-operating
activitiesundertwoheads,namelyinvestingactivitiesandfinancingactivities.This
helpstoexplaintheoverallliquiditypositionoftheenterpriseanditsabilitytomeet itscash
commitment.

Explainreasonforsurplusorshortageofcash:abusinessmayhavemadeprofit
andyetrunningshortofcash.Similarlyabusinessmayhavesufferedalossandstill

19
hassufficientcashinbank.A cashflowstatementdisclosesreasonforsuchincreases or
decreases of cash balance.

Partiesinterestedinfinancial statementanalysis of EME Technologies

Theanalysisoffinancialfigurescontainedinthecompany'sprofitandlossaccountandbalance

sheetbyemployingappropriatetechniqueisknownafinancialstatementanalysis.Financial
statementanalysisisusefultodifferentpartiestoobtaintherequiredinformationaboutthe organization.
Followingare the parties interestedin financial statement analysis.

1. Shareholders

Shareholders are interested in financial statementanalysis to know the profitabilityof the


organization. Profitabilityshows thegrowth potentialityof an organization and safetyof
investment of shareholders.
2.InvestorsandLenders

Investors and lenders areinterested to know the solvencyposition of an organization. They


analyze the financial statement position to know about the safetyof theirinvestment and
abilityto payinterest andrepayment of principle amounton due date.
3. Creditors

Creditors are interested in analyzingthe financialstatements of EME Technologies in order to


know the short term liquidityposition of an organization. Creditors analyse the financial
statement to know either the organization is unable to paythe amount of short term liabilities
on due date.
4. Management

Management of EME Technologies isinterested to analyze thefinancialstatement for


measuringthe effectiveness of its policies and decisions.It analyze the financial statements
to know short term and long term solvencyposition, profitability, liquidityposition and
return on investment from the business.

5. Government

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Government is interestedto analyze thefinancialposition in determiningthe amount of tax
liability of EME Technologies.Italso helps for formulating effective plans and policies for
economic growth.

6. Purchaserof thebusiness

Anyperson who is interested to buyagoingconcern analyse the financialstatement to


determine its real value.It makes an assessment ofthe financial and operating strengthand
weakness of the business.

7. Otherinterestedgroup

Financial statement analysis is also important for manyothers. For example worker’s and
trader union, etc.

IMPORTANCE
 Cash flow statement helps the management in taking short term financial decision.

 It enables the management to account for situation when business has earned huge profit yet
run without money or when it has suffered a loss & still as plenty of money at the bank.

 It gives the clear picture of cash in flow & out from the operation. It is there for, very useful to
internal financial management the possibility of retiring long term debts, in planning
replacement of plant facility or formulating dividend policy.

 Cash flow statement act like a controller for the management. A comparison of cash flow
statement of previous year with the budget for that would indicate to that extend the resources
of the enterprise where raise it & applied according to the plan which may highlight trends of
the moment of cash of the company.

 Cash flow statement is useful in evaluating financial policy & current cash position. The cash
flow statement will enable the management in planning & co-ordinate the financial operation
probably because cash flow statement is prepared on estimated bases for the next accounting
period.

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 So, that the management come to know how much cash will be needed and at which time
period the recruitment of cash will be raised. What are the internal sources & external sources
of cash especially this statement is important for the preparing the cash budget.

TRENDPERCENTAGEANALYSIS

Thenextimportanttoolsofanalysisaretrendpercentagewhichplayssignificantrolein
analyzingthefinancialstatureoftheenterprisethroughbaseyears’performanceratio
computation.Thisnotonlyrevealsthetrendmovementofthefinancialperformanceofthe enterprise
but also highlights the strengths andweaknesses of theenterprise
The following ratio isbeingused tocompute the trend percentage

Currentyear = -------------- X100Baseyear

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CHAPTER 3

OBJECTIVE OF STUDY
 To determine the overall performance of the cash in concern.

 To know the credit worthiness of the concern.


 To assess the liquidity and short term solvency position of the firm.
 To understand the relationship maintained with the trade creditors and the debtors of the firm.
 To identify the basic forces influencing the cash management of the firm.

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CHATER -4

REVIEW OF LITERATURE

Review of Literature Accrual Accounting Basis3 is an accounting method that measures the performance and
status of a company regardless of when cash transactions occur; financial transactions and events are
recognized by matching revenues to expenses (the matching principle) at the time when the transaction occurs
rather than when payment actually is made (or received). This allows current cash inflows and outflows to be
combined with expected future cash inflows and outflows to provide a more accurate picture of a company's
current financial condition. Accrual accounting is the standard accounting practice for most big companies;
however, its relative complexity makes it more expensive to implement for small companies. This is the
opposite of cash accounting, which recognizes transactions only when there is an exchange of cash. Ball and
Brown et al (1968) 4 have searched the relationship between accounting earnings and stock price and
suggested that earning have an implication for future cash flows of companies. Ashton et al (1974) 5 suggested
that accounting information from financial statements is useful in predicting future cash flow of a company.
Consequently, the usefulness of accounting information has been investigated in terms of their ability to
predict future cash flows.

FASB (1978)6 the important of cash flow prediction is supported by statement of accounting standard. Both
the Financial Accounting Standard Board (FASB) and the International Accounting Standard Committee (IASC)
provided a fundamental guideline for preparing and presenting financial statements, that the objective of
reporting financial statements is to provide financial information for users to predict the amount, timing and
uncertainty of the future cash flow of a company. The primary objective of accounting data is to provide
information to help present and potential investors; creditors and other things like assess the amount, timing
and uncertainty of prospective net cash inflows to the related enterprise.

24
CHAPTER:4

RESEARCH DESIGN

25
2.7 RESEARCH DESIGN:

Theresearchdesignistheconceptualstructurewhichresearchisconducted.It
constitutestheblueprintforthecollection,measurementandanalysisofdata.Aresearch
designinthebasicplan,whichguidecollectionandanalysisofthedata.Aresearchdesign
framework,whichspecifiesthetypeofinformationtocollectthesourcesofdatacollection procedure.
Data was collected form primaryand secondarysources.

Researchdesignadoptedforstudy

Explorative research is used in the study:-

Studyof secondaryinformation i.e., annual report of the company

2.8 RESEARCH DESIGNMETHODOLOGY

PrimaryandSecondarydata of EME Technologies


arecollectedtoachievetheobjectiveoftheproject,towardsthisdirectionpersonalinterviewwiththereprese
ntativewillbeundertaken.Datawillalso b e
gatheredfromQuestionnairedistributedamongstexecutiveinvariousdepartmentsfor survey.

SamplingMethod

PrimaryData

26
Theseareobtainedfrominteractionwiththedepartmentexecutives,fromdepartment

manual and otherpublication of company.

Secondary Data

Thesed a t a f o r EME Technologies


areobtainedfromannualreports,magazines,websiteandreportsofthecompany

.Alsodataandinformationwillbecollectedfromacademicjournalsandotherpapers presented at
conventionsrelated to the topic.

SamplingSize : 5yearsfinancial statements

PLANOFANALYSIS

Datacollectedfromalltheavailablesourceswillbetabulate,collated,andinterpretedduly supported
with charts, tables, graphsetc. Whenevernecessarydata collected will be subjected to such
authenticitytest as deemed necessary.

Noeffectwillbespreadinensuringacompleteofdetailstudy,giventhelimitationtothe

study.Basedonthefindingsonthestudy andtheresultantconclusion,recommendationswill be
offered.

METHOD OFANALYSIS:

Analyse the effectivenesswith the help of annual report of the EME


Technologies

. Own observation of various practicesfollowed bythecompany.

2.9 TOOLS USED:

27
Thetoolsandtechniqueisusedfortheanalysingthedata of EME Technologies,whichincludetable,bar-
chart

andsimplepercentagemethodhavebeenusedforthepurposeofanalysisandpresentation. Forthe
data analysis thesubsequent interpretation has been interpreted.

2.10LIMITATION OFTHE STUDY:

LIMITATION OF THE CASH FLOW STATEMENT

Some of the limitations of the cash flow statement are as follows:

A As the enterprise shifts from strictly cash basis, enters into credit transactions as well takes into
account prepared and accrued items, the net income no doubt would generally represent an
increase in working capital. Yet equating net income in cash flow for such enterprise would be
inaccurate and misleading since a number of non cash items affects the net income of the firm.

B Cash flow is part of working capital. The volume of cost flowing in any part of the
system and the speed at which it flows determines the amount of capital. Tied up sometimes in
any segment of the enterprise or business. At any given time cash flow analysis used in
connection with ratio analysis provided a barometer for measuring the aforesaid change and
financing problem of the business much more manageable.

LIMITATION OF STUDY
1 The time available was not sufficient enough to probe deeper for more detail study.
2 Limitation of secondary data used for making study can be considered as the limitation of
itself.
3 Similarly the limitation of the various tools used for analysis can be a limitation of the
study.

******
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CHAPTER:5

ANALYSISANDINTERPRETATION

29
TABLE: 4.1

TableshowingnetprofitofEME Technologiesbeforetaxandpriorperioditem

Ears Netprofitbeforetax&priorperiodite Trends%


ms
2010-11 3915833 100%

2011-12 7323530 187%

2012-13 4346656 111%

2013-14 1622700 41%

2014-15 1712000 44%

8000000

7000000

6000000

5000000

4000000

3000000

2000000

1000000

0
2010-11 2011-12 2012-13 2013-14 2014-15

Analysis:

Fromthefollowingtableitcanbeseenthatthecompany’snetprofitintrendistheyear 2010-
11was100%andithadincreasedin2011-12by187%andafterthattherewas
decreasedinprofitgraduallyin2012-13itbecame111%,in2013-14itwas41%,andithas decreases
and became 44% inyear2014-15.

30
TABLE: 4.2

Table showingadjustmentfornonoperatingitems of EME Technologies

Years Adjustmentfornonoperating items Trends%


2010 9491008 100%
2011 8599611 91%
2012 11395395 120%
2013 11712600 123%
2014 14529800 153%

16000000

14000000

12000000

10000000

8000000

6000000

4000000

2000000

0
2010 2011 2012 2013 2014

Analysis

Formtheabovetablewecanseethattheadjustmentsfornon-operatingitemsfrom2010–
2011.2010isthebaseyearanditis100%andthenthereisadecreasefrom100%to90%in
theyear2012andafterthattherebegraduallyincreasedineveryyear120%in2013,123% in 2014 and
153%in 2015.

31
TABLE: 4.3

Table showingoperatingprofitbeforechangesinworkingcapital

Years Operatingprofitbeforeworking capital changes Trends%

2010 13406841 100%

2011 15923141 119%

2012 15742050 117%


2013 13335300 99%
2014 16241846 121%

18000000
16000000
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
2010 2011 2012 2013 2014

Analysis

Theabovetablegivestheinformationaboutoperatingprofitbeforechangeinworking
capital.2010isthebaseyearso,it’s100%andinyear2011ithasbeenincreasesto119%
andintheyearitisalsoshowinganincrease0f17%intheoperatingprofitcomparetothe
baseyear.Ithasbeendecreasedintheyear2013to99%andintheyear2014ismore compareto the
previousyears.

32
TABLE: 4.4

Table showing Cashgeneratedfromoperations of EME Technologies


Years Cashgeneratedfromoperations Trends%

2010 1157411 100%

2011 4934877 426%


2012 2567573 222%
2013 2129500 184%

2014 15828000 1367%

18000000

16000000

14000000

12000000

10000000

8000000

6000000

4000000

2000000

0
2010 2011 2012 2013 2014

Analysis

Cashgeneratedfromoperationiscomparativelyhigherintheyear2013andhasanditis showingthat
companyoperatingprofit is in goodcondition.

Inyear2010baseyearcashgeneratedfromoperationis100%andithasincreasedto426%
andthenthereisadecreasedincompareofpreviousyearbutitsgoodaccordingtothebase year
andevery year is good compareto baseyear.
33
TABLE:4.5

Table showing taxpaid:

Years Tax paid Trends%


2010 502288 100%
2011 1189838 237%

2012 1497855 298%

2013 1106200 200%

2014 483200 87%

1600000

1400000

1200000

1000000

800000

600000

400000

200000

0
2010 2011 2012 2013 2014

Analysis:

Theabovetableindicatetaxpaidduringtheyear2010-2013bythecompanyanditis
continuouslyincreasingintheyear2010,2011,and2012afterthereisndecreaseintheyear of 2013.
The companypaid lowest rate oftax in the year2013compare tothe baseyear.

34
TABLE: 4.6

Table cashflow fromoperatingactivatesafterexceptionalitems

Years Netcash flow fromoperatingactivities Trends%


after exceptionalitems
2010 655123 100%

2011 3745040 100%


572%
2012 1069718 163%
2013 1023300 156%
2014 15395800 2350%

18000000

16000000

14000000

12000000

10000000

8000000

6000000

4000000

2000000

0
2010 2011 2012 2013 2014

ANALYSIS

Itshowsthatthenetcashfromoperatingactivityhasincreasedto572%intheyear2010and then
thereisdecrease inthecontinues2years163%&156%in2011n 2014respectively and the highest
netcash flowfrom the operating activityis in 2013 is2370%.

35
TABLE: 4.7

Table showing additionof fixedassets andWIP

Years Additionof fixedassets andWIP Trends%

2010 11549886 100%


2011 9960934 84%

2012 7930746 69%


2013 8157900 71%

2014 12164400 105%

14000000

12000000

10000000

8000000

6000000

4000000

2000000

0
2010 2011 2012 2013 2014

ANALYSIS

Theabovetableprovideinfoaboutthefixedassetpurchasedbyacompanyduring5years.
Fixedassetpurchaseis84%in2011,69%in2012,71%in2013and105%in2014.Itis
comparativelymore in 2014 than the allyears.

36
TABLE:4.8

Table showing interestreceived

Years Interestreceived Trends

2010 129019 100%


2011 157301 122%
2012 87283 68%
2013 36100 28%

2014 35600 27%

180000

160000

140000

120000

100000

80000

60000

40000

20000

0
2010 2011 2012 2013 2014

Analysis

Theabovetableisshowingtheinterestreceivedbythecompanyduring5yearsfrom2010-
2014.Wecanobservethatinthe2011ithasincreasedto122%andthenextyear2012ithas
decreasedto68%andconsequentlydecreasingintheyear201428%andin2014itisonly 27%.

37
TABLE: 4.9

Table showing netcashusedininvestmentactivities of EME Technologies

Years Net cashused in investmentactivities Trends%

2010 11420961 100%

2011 9553633 84%

2012 11108951 97%

2013 8194800 72%

2014 12269200 107%

14000000

12000000

10000000

8000000

6000000

4000000

2000000

0
2010 2011 2012 2013 2014

Analysis

Theabovetableisshowingnetusedininvestmentactivitieswhichisconstantlydecreasing
everyyear.2010isthebaseyearwhereinvestmentis100%fromthereitisdecreasing.In
2011itbecame84%,in2012itis97%,andin2013itis72%andin2014itis107%thereis moreused of
cash in this year.

38
TABLE:4.10
Table showing receiptfromissue ofequitysharecapital

Years Receipts fromissue of sharecapital Trends

2010 5000000 100%

2011 5000000 100%

2012 5000000 100%


2013 6250000 125%

2014 4000000 80%

7000000

6000000

5000000

4000000

3000000

2000000

1000000

0
2010 2011 2012 2013 2014

Analysis

Theabovetableprovideinfoaboutthesharecapitalraisedduringtheperiodof2010-2014. Equity
shareraisedduringtheyear2010,2011and2012is100%thereisnotany fundraised
bythecompanyduringtheyear.In201325%equitysharehasbeenraisedbytheyear2013 and it has
been decreasein theyear2014 to 80%.

39
CHAPTER:6

Findings,suggestion,and conclusion

FINDINGS:
40
 Theperformanceofthenetprofitbeforetaxandtheconditionintheyear2010anda gradual
decreasefrom 2011 and thereon.
 Adjustmentfornon-operatingitems.Indicatesthatdeductionsmadeonnetprofit beforetax
shows continues increasefrom 2010-2013.
 Theoperatingcapitalchangesindicategoodperformanceofcompanyinyear2010, 2011
&2013.But a slightlypoorperformancein theyear2010and 2012.
 Cashgeneratedfromoperationiscomparativelyhigherintheyear2010,andhas increase in
priorities thereafter.
 Thetaxpaidduringtheyear2010till2012showsincreasingtrendwhereasreduced in
theyear2013.
 Netcashinflowfromtheoperatingactivitiesshowsagoodperformanceintheyear 2010, 2012
&2013 compared to baseyear 2010.
 Interestreceivedoninvestmentshowsincreaseintheyear2010andafterdecreasing trend.
 Purchasefixedassetsshowsthatcashoutflowforpurchasingfixedassethasdeclined till and
shows an increase in 2013.
 Theinvestment sold duringtheabove specified period shows fluctuations of increased
and decreased.
 Ithighlightthatthereisnocashflowfromsharestill2011fromtheyear2010&in 2012 thereis
inflow ofcash &in 2013 there is out flow offund.
 Theprioritiesofraisinglongtermloanssecuretohighin2010,2011&2012 compared to
2010&2013.
 Thereiscashoutflowintheformofredemptionofdebenturesintheyear2010and 2010 and no
effect in theyear from 2011-13.
 Payment ofdividendshowsgradualdeclineintheoutflowofcashfrom2010to2011, and
thereis decrease inoutflow in 2013.
 Cashinflowfromfinancingactivitiesshowsfluctuations of EME
Technologies.Itisverycomparetoits2009.

 Thereis no anyinflowofcash in the statement.

SUGGESTIONANDRECOMMENDATION

41
1.TheEME Technologiesconcentrateonincreaseindebtors.Ithastomodify
andimproviseitstermsandconditionsofcreditsales.Asitmayblocktheinflowof
cashintheirrecoverablebaddebts.Thisturncanimprovethecompany’soperating profit.
2.Interestreceivedoninvestmentshowscontinuousdeclinewhichinturnmayresultin

cashinflowfrominvestingactivities.Therefore,itissuggestedtoEME Technologiesto
investamountonpurchaseofsuchlong-termsinvestment.Theseinturnguaranty highest
rate ofreturn.
3.ItisalsorecommendedtotheEME Technologiestomaintaintheproportionofcurrentassets
and current liabilities as a resultof which therewill be increase ofcapital.
4.Thecompanyhassuggestedhavingapropersystematicutilisationofcashforits
respectiveproperutilisationofcashinflowfromlongtermsourcessuchasissueof
sharecapitalinrisinginlongtermcapitalshouldbeusedforpurchaseoflongterm assets such
as fixed assets and investment.
5.Saleofinvestmentwithinmaturity periodhastobeavoidedaslongterminvestments
wouldgetbetterbenefitratherthansalesproceedwithinshortspanwhichalsoaffect the
regularincome ofinterest.
6.The companyshould properutilise the cash in theinvesting and

financingactivities.7.Trackaccountsreceivable toidentify andavoidslow-paying


costumer.Refusing todo
business with slow paying costumer.

CONCLUSION:

42
ThestudyoncashflowanalysisofEME Technologieswasmainlyundertakentostudytheinflow&
outflowofcashfromvariousfinancialelementinpracticalcondition.Thisisanopportunity,
whichhelpedmeinunderstandingcashflowsandpracticalknowledgewithrespecttoa company’s
performance.

Cashinflowfromoperatingactivitiesintheformofoperatingprofitbeforeworkingcapital
changes,cashgenerationfromoperationsandnetcashinflowfromoperationshowsgreat
improvementin2010&2011comparetothebaseyear.Whereitshowsreductionvalueof cashoutflow
intheform ofbaddebts,depreciation,andlosson thesaleofassetsand taxpaid duringtheyears.

Whencashflowfrominvestingactivitieswereanalyseditshowscashoutflowisduetoheavypurchaseoffixe
dassetsandinvestmentsfrom2009-2012.Interestreceivedisonly inflow of the cashfrom investment.

Cashflowfromfinancialactivitiesshowsinflowofcashinalltheyearfrom2009-2012.

Whereas,inflowgraduallydecreasinginvaluefrom2009-12.Equitysharecapitalissued,
longtermborrowingsraisedandreceiptsofunsecuredloansarethereasonforcashinflowin
financialactivities.Howeverpaymentoffinancialcharges,dividendandCDTarethe outflows
noticed in the financial activities.

However,overallcashflowfromalltheactivitiesshowsgoodinflowofcashintheyear
2009,whichhasdeclinein2010.Andthereafteritindicatesoutflowofcashintheyear2011-and 2012.

Toconcludethecompany’scashperformanceinallyearsseemstobesatisfactoryexceptin
theyear2012,asthereisdeclineinthecashequivalentconditionofthecompanyintheyear 2012
compareto its baseyear 2010.

43
BIBLIOGRAPHY

For the information I have referred to the following books and contacts in the project and I am including this
details from the under mentioned books as well as websites

Books

 N Ramchandran, ram kumar


 Bahadur Murao-Management accounting 2010
 Annual report of the company
 TR jain
 Kalyani publishers-management accounting
 Ravi M. kishore-cost accounting and financial management

Websites

 www.emetechnologies.com
 www.seminarprojects.com
 www.wikipedia.com
 www.allbusiness.com
 www.glassdoor.co.in
 www.indeed.co.in
 www.googlebooks.com

44