By mani sajnani

Table of Content
Chapter 1: INTRODUCTION ON CASH FLOW STATEMENT 1.1 Definition 1.2 Purpose 1.3 Utility of Cash Flow Analysis 1.4 History and variations Chapter 2: CASH FLOW ACTIVITIES 2.1Cash flow activities 2.2Disclosure of non cash activities 2.3Preparation method 2.4Rules Chapter 2: EXAMPLE OF CASH FLOW STATEMENT 2.1 Example1-Tax Consultation Inc. 2.2 Example2- Business Resource Software, Inc 2.3 Example3- Jet Airways (India) Limited 2.4 Example4- Cash Flow Statement (IFRS) Chapter 3: FUND FLOW STATEMENT 3.1 Meaning 3.2 Sources & uses 3.3 Format of fund flow statement 3.4 Examples:a) Credit market debt b)Coastal roadways limited Capter 4: EXAMPLES OF FUND FLOW STATEMENTS a) Credit market debt b) Coastal roadways limited

BONAFIDE CERTIFICATE
Certified that this project report titled CASH FLOW AND FUND FLOW as a technique to maintain liquidity is the bonafide work of mani sajnani Enrollment No.0421131708 of B.B.A (Gen) 3rd semester who carried out the research under my supervision. Certified further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on earlier occasion on this or any other candidate.

Mr. M.N.Jha Project guide

PREFACE
I feel privileged to do work on the topic CASH FLOW AND FUND FLOW as a technique to maintain liquidity chapter wise summary and my study is being given below: Chapter1: Introduction on Cash Flow Statement Chapter2: Cash Flow Activities Chapter3: Example of Cash Flow Statement Chapter4: Fund Flow Statement Chapter5: Example of Fund Flow Statement

ACKNOWLEDGEMENT
I would like to take this opportunity to sincerely thank Mr.M.N.Jha for his valuable support, guidance. Under his able guidance I was able to accomplish my project with confidence. I would also like to thanks my friend and my siblings who directly or indirectly helped me in my project. I would also like to sincerely thank our institute Beri Institute of Technology Training and research. Where, I spared my time to have access to wide information on internet.

Mani sajnani

OBJECTIVE
5

To study CASH FLOW AND FUND FLOW as a technique to maintain the liquidity and for efficient cash management of a company.

CHAPTER -1
6

CASH FLOW STATEMENT

Definition of cash flow statement
Summary of the actual or anticipated incomings and outgoings of cash in a firm over an accounting period (month, quarter, year). It answers the questions Where the money came (will come) from? and Where it went (will go)? cash flow statements assess the amount, timing, and predictability of cash-inflows and cash-outflows, and are used as the basis for budgeting and business-planning. The accounting data is presented usually in three main sections: (1) Operating-activities (sales of goods or services), (2) Investing-activities (sale or purchase of an asset, and (3) Financing-activities (borrowings, or sale of common stock. Together, these sections show the overall (net) change in the firm's cash-flow for the period the statement is prepared. Lenders and potential investors closely examine the cash flow resulting from the operating activities. This section represents after-tax net income plus depreciation and amortization and, therefore, the ability of the firm to service its debt and pay dividends. With balance sheet and income statement (profit and loss account), cash flow statement constitutes the critical set of financial information required to manage a business. In financial accounting, a cash flow statement, also known as statement of cash flows or funds flow statement,[1] is a financial statement that shows how changes in balance sheet and income accounts affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. The statement captures both the current operating results and the accompanying changes in the balance sheet .As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. International Accounting Standard 7 (IAS 7), is the International Accounting Standard that deals with cash flow statements. People and groups interested in cash flow statements include: Accounting personnel, who need to know whether the organization will be able to cover payroll and other immediate expenses Potential lenders or creditors, who want a clear picture of a company's ability to repay Potential investors, who need to judge whether the company is financially sound Potential employees or contractors, who need to know whether the company will be able to afford compensation

UTILITY OF CASH FLOW ANALYSIS

A Cash Flow Statement is useful for short term planning.A business enterprise needs sufficient cash to meet its various obligations in near future such as payment forpurchase of fixed assets, payment of debts maturing in the near future,expenses of the business, etc. A historical analysis of the different sources and applications of cash will enable the management to make reliablecash flow projections for the immediate future. Thus,a cash flow analysis is an important financial tool for the management. Its main advantages are as follows:-

1) Helps in efficient cash management

Cash flow analysis helps in evaluating financial policies and cash positions.Cash is the basis for all operations and hence a projected cash flow statement will enable the management to plan and coordinate the financial operations properly.

2) Helps in internal financial management

Cash flow analysis provides information about funds which will be available from operations.This will help the management in determining policies regarding internal financial management, example:- possibility of repayment of long term debt, dividend policies, etc

3) Discloses the movements of cash

Cash flow statement discloses the complete story of cash movement.The ingrease in, or decrease of , cash and the reason therefore can be known.It discloses the reason for low cash balance in spite of heavy operating profits or for heavy cash balance in spite of low profits.However,comparison of original forecaste with the actual results highlights the trends of movement of cash which may otherwise may go undetected

4) Disclose success or failure of cash planning

The extent of success or failure of cash planning can be known by comparing the projected cash flow statement with the actual cash flow statement and necessary remedial measures can be taken

Purpose
Statement of Cash Flow - Simple Example for the period 01/01/2006 to 12/31/2006 Cash flow from operations Cash flow from investing Cash flow from financing Net increase (decrease) in cash $4,000 $(1,000) $(2,000) $1,000

The cash flow statement was previously known as the flow of funds statement .The cash flow statement reflects a firm's liquidity. The balance sheet is a snapshot of a firm's financial resources and obligations at a single point in time, and the income statement summarizes a firm's financial transactions over an interval of time. These two financial statements reflect the accrual basis accounting used by firms to match revenues with the expenses associated with generating those revenues. The cash flow statement includes only inflows and outflows of cash and cash equivalents; it excludes transactions that do not directly affect cash receipts and payments. These noncash transactions include depreciation or write-offs on bad debts or credit losses to name a few. The cash flow statement is a cash basis report on three types of financial activities: operating activities, investing activities, and financing activities. Noncash activities are usually reported in footnotes. The cash flow statement is intended to 1. provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances 2. provide additional information for evaluating changes in assets, liabilities and equity 3. improve the comparability of different firms' operating performance by eliminating the effects of different accounting methods 4. indicate the amount, timing and probability of future cash flows The cash flow statement has been adopted as a standard financial statement because it eliminates allocations, which might be derived from different accounting methods, such as various timeframes for depreciating fixed assets.

History and variations

Cash basis financial statements were common before accrual basis financial statements. The "flow of funds" statements of the past were cash flow statements. In the United States in 1971, the Financial Accounting Standards Board (FASB) defined rules that made it mandatory under Generally Accepted Accounting Principles (US GAAP) to report sources and uses of funds, but the definition of "funds" was not clear ."Net working capital" might be cash or might be the difference between current assets and current liabilities. From the late 1970 to the mid-1980s, the FASB discussed the usefulness of predicting future cash flows.In 1987, FASB Statement No. 95 (FAS 95) mandated that firms provide cash flow statements. In 1992, the International Accounting Standards Board issued International Accounting Standard 7 (IAS 7), Cash Flow Statements, which became effective in 1994, mandating that firms provide cash flow statements. US GAAP and IAS 7 rules for cash flow statements are similar. Differences include: IAS 7 requires that the cash flow statement include changes in both cash and cash equivalents. US GAAP permits using cash alone or cash and cash equivalents.[ IAS 7 permits bank borrowings (overdraft) in certain countries to be included in cash equivalents rather than being considered a part of financing activities. IAS 7 allows interest paid to be included in operating activities or financing activities. US GAAP requires that interest paid be included in operating activities.[S US GAAP (FAS 95) requires that when the direct method is used to present the operating activities of the cash flow statement, a supplemental schedule must also present a cash flow statement using the indirect method. The IASC strongly recommends the direct method but allows either method. The IASC considers the indirect method less clear to users of financial statements. Cash flow statements are most commonly prepared using the indirect method, which is not especially useful in projecting future cash flows.

Cash flow activities

The cash flow statement is partitioned into three segments, namely: cash flow resulting from operating activities, cash flow resulting from investing activities, and cash flow resulting from financing activities. The money coming into the business is called cash inflow, and money going out from the business is called cash outflow.

Operating activities
Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising, and shipping the product. Under IAS 7, operating cash flows include: 10

Receipts from the sale of goods or services Receipts for the sale of loans, debt or equity instruments in a trading portfolio Interest received on loans Dividends received on equity securities Payments to suppliers for goods and services Payments to employees or on behalf of employees Interest payments (alternatively, this can be reported under financing activities in IAS 7, and US GAAP)

Items which are added back to [or subtracted from, as appropriate] the net income figure (which is found on the Income Statement) to arrive at cash flows from operations generally include: Depreciation (loss of tangible asset value over time) Deferred tax Amortization (loss of intangible asset value over time) Any gains or losses associated with the sale of a non-current asset, because associated cash flows do not belong in the operating section.(unrealized gains/losses are also added back from the income statement)

Investing activities
Examples of investing activities are Purchase of an asset (assets can be land, building, equipment, marketable securities, etc.) Loans made to suppliers or customers

Financing activities
Financing activities include the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders as dividends as the company generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement. Under IAS 7, Proceeds from issuing short-term or long-term debt Payments of dividends Payments for repurchase of company shares Repayment of debt principal, including capital leases 11

For non-profit organizations, receipts of donor-restricted cash that is limited to long-term purposes Items under the financing activities section include: Dividends paid Sale or repurchase of the company's stock Net borrowings Payment of dividend tax

Disclosure of non cash activities

Under IAS 7, non cash investing and financing activities are disclosed in footnotes to the financial statements. Under US GAAP, non cash activities may be disclosed in a footnote or within the cash flow statement itself. Non cash financing activities may include. Leasing to purchase an asset Converting debt to equity Exchanging non cash assets or liabilities for other non cash assets or liabilities Issuing shares in exchange for assets

Preparation methods
The direct method of preparing a cash flow statement results in a more easily understood report .The indirect method is almost universally used, because FAS 95 requires a supplementary report similar to the indirect method if a company chooses to use the direct method.

Direct method
The direct method for creating a cash flow statement reports major classes of gross cash receipts and payments. Under IAS 7, dividends received may be reported under operating activities or under investing activities. If taxes paid are directly linked to operating activities, they are reported under operating activities; if the taxes are directly linked to investing activities or financing activities, they are reported under investing or financing activities.

Sample cash flow statement using the direct method

Cash flows from (used in) operating activities Cash receipts from customers Cash paid to suppliers and employees 27,500 (20,000) 12

Cash generated from operations (sum) Interest paid Income taxes paid Net cash flows from operating activities Cash flows from (used in) investing activities Proceeds from the sale of equipment Dividends received Net cash flows from investing activities Cash flows from (used in) financing activities Dividends paid Net cash flows used in financing activities . Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year

7,500 (2,000) (4,000) 1,500

7,500 3,000 10,500

(2,500) (2,500)

9,500 1,000 $10,500

Indirect method
The indirect method uses net-income as a starting point, makes adjustments for all transactions for non-cash items, then adjusts for all cash-based transactions. An increase in an asset account is subtracted from net income, and an increase in a liability account is added back to net income. This method converts accrual-basis net income (or loss) into cash flow by using a series of additions and deductions.

Rules
The following rules are used to make adjustments for changes in current assets and liabilities, operating items not providing or using cash and non-operating items. Decrease in non cash current assets are added to net income Increase in non cash current asset are subtracted from net income Increase in current liabilities are added to net income Decrease in current liabilities are subtracted from net income

13

Expenses with no cash outflows are added back to net income (depreciation and/or amortization expense are the only operating items that have no effect on cash flows in the period) Revenues with no cash inflows are subtracted from net income Non operating losses are added back to net income Non operating gains are subtracted from net income

CHAPTER-2 FEW EXAMPLES OF CASH FLOW STATEMENTS

Citigroup Incorporated cash flow example:
Citigroup Cash Flow Statement (all numbers in thousands)

14

Period ending Net income

12/31/2007 12/31/2006 12/31/2005 21,538,000 24,589,000 17,046,000

Operating activities, cash flows provided by or used in: Depreciation and amortization Adjustments to net income Decrease (increase) in accounts receivable Increase (decrease) in liabilities (A/P, taxes payable) Decrease (increase) in inventories Increase (decrease) in other operating activities Net cash flow from operating activities Investing activities, cash flows provided by or used in: Capital expenditures Investments Other cash flows from investing activities Net cash flows from investing activities (4,035,000) (3,724,000) (3,011,000) (201,777,000) (71,710,000) (75,649,000) 1,606,000 17,009,000 (571,000) 2,790,000 4,617,000 12,503,000 131,622,000 -2,592,000 621,000 17,236,000 19,822,000 -2,747,000 2,910,000 -37,856,000 --

(173,057,000) (33,061,000) (62,963,000) 13,000 31,799,000 (2,404,000)

(204,206,000) (58,425,000) (79,231,000)

Financing activities, cash flows provided by or used in: Dividends paid Sale (repurchase) of stock Increase (decrease) in debt Other cash flows from financing activities Net cash flows from financing activities Effect of exchange rate changes Net increase (decrease) in cash and cash equivalents (9,826,000) (9,188,000) (8,375,000) (5,327,000) (12,090,000) 101,122,000 120,461,000 206,430,000 26,651,000 27,910,000 33,283,000 133,000 21,204,000 70,349,000 83,311,000 731,000 $2,407,000

645,000 (1,840,000) $2,882,000 $4,817,000

Cash flow activities

The cash flow statement is partitioned into three segments, namely: cash flow resulting from operating activities, cash flow resulting from investing activities, and cash flow resulting from financing activities. 15

The money coming into the business is called cash inflow, and money going out from the business is called cash outflow.

Operating activities
Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising, and shipping the product. Under IAS 7, operating cash flows include: Receipts from the sale of goods or services Receipts for the sale of loans, debt or equity instruments in a trading portfolio Interest received on loans Dividends received on equity securities Payments to suppliers for goods and services Payments to employees or on behalf of employees Interest payments (alternatively, this can be reported under financing activities in IAS 7, and US GAAP) Items which are added back to [or subtracted from, as appropriate] the net income figure (which is found on the Income Statement) to arrive at cash flows from operations generally include: Depreciation (loss of tangible asset value over time) Deferred tax Amortization (loss of intangible asset value over time) Any gains or losses associated with the sale of a non-current asset, because associated cash flows do not belong in the operating section.(unrealized gains/losses are also added back from the income statement)

Investing activities
Examples of Investing activities are Purchase of an asset (assets can be land, building, equipment, marketable securities, etc.) Loans made to suppliers or customers

Financing activities
Financing activities include the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders as dividends as the company 16

generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement. Under IAS 7, Proceeds from issuing short-term or long-term debt Payments of dividends Payments for repurchase of company shares Repayment of debt principal, including capital leases For non-profit organizations, receipts of donor-restricted cash that is limited to long-term purposes Items under the financing activities section include: Dividends paid Sale or repurchase of the company's stock Net borrowings Payment of dividend tax

Disclosure of non cash activities

Under IAS 7, non cash investing and financing activities are disclosed in footnotes to the financial statements. Under US GAAP, non cash activities may be disclosed in a footnote or within the cash flow statement itself. Non cash financing activities may include. Leasing to purchase an asset Converting debt to equity Exchanging non cash assets or liabilities for other non cash assets or liabilities Issuing shares in exchange for assets

Preparation methods
The direct method of preparing a cash flow statement results in a more easily understood report. The indirect method is almost universally used, because FAS 95 requires a supplementary report similar to the indirect method if a company chooses to use the direct method.

Direct method
The direct method for creating a cash flow statement reports major classes of gross cash receipts and payments. Under IAS 7, dividends received may be reported under operating activities or under investing activities. If taxes paid are directly linked to operating activities, they are reported under operating activities; if the taxes are directly linked to investing activities or financing activities, they are reported under investing or financing activities.

Sample cash flow statement using the direct method

17

Cash flows from (used in) operating activities Cash receipts from customers Cash paid to suppliers and employees Cash generated from operations (sum) Interest paid Income taxes paid Net cash flows from operating activities Cash flows from (used in) investing activities Proceeds from the sale of equipment Dividends received Net cash flows from investing activities Cash flows from (used in) financing activities Dividends paid Net cash flows used in financing activities . Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 9,500 1,000 $10,500 (2,500) (2,500) 7,500 3,000 10,500 27,500 (20,000) 7,500 (2,000) (4,000) 1,500

Indirect method
The indirect method uses net-income as a starting point, makes adjustments for all transactions for non-cash items, then adjusts for all cash-based transactions. An increase in an asset account is subtracted from net income, and an increase in a liability account is added back to net income. This method converts accrual-basis net income (or loss) into cash flow by using a series of additions and deductions.

Rules
The following rules are used to make adjustments for changes in current assets and liabilities, operating items not providing or using cash and nonoperating items. Decrease in non cash current assets are added to net income Increase in non cash current asset are subtracted from net income Increase in current liabilities are added to net income 18

Decrease in current liabilities are subtracted from net income Expenses with no cash outflows are added back to net income (depreciation and/or amortization expense are the only operating items that have no effect on cash flows in the period) Revenues with no cash inflows are subtracted from net income Non operating losses are added back to net income Non Soperating gains are subtracted from net income

Citigroup Incorporated cash flow example:

Citigroup Cash Flow Statement (all numbers in thousands) Period ending Net income 12/31/2007 12/31/2006 12/31/2005 21,538,000 24,589,000 17,046,000

Operating activities, cash flows provided by or used in: Depreciation and amortization Adjustments to net income Decrease (increase) in accounts receivable Increase (decrease) in liabilities (A/P, taxes payable) Decrease (increase) in inventories Increase (decrease) in other operating activities 19 -2,790,000 4,617,000 2,592,000 621,000 2,747,000 2,910,000

12,503,000

17,236,000

--

131,622,000

19,822,000

37,856,000

--

--

(173,057,000) (33,061,000) (62,963,000)

Net cash flow from operating activities Investing activities, cash flows provided by or used in: Capital expenditures Investments Other cash flows from investing activities Net cash flows from investing activities

13,000

31,799,000 (2,404,000)

(4,035,000) (3,724,000) (3,011,000) (201,777,000) (71,710,000) (75,649,000) 1,606,000 17,009,000 (571,000)

(204,206,000) (58,425,000) (79,231,000)

Financing activities, cash flows provided by or used in: Dividends paid Sale (repurchase) of stock Increase (decrease) in debt Other cash flows from financing activities Net cash flows from financing activities Effect of exchange rate changes (9,826,000) (9,188,000) (8,375,000) (5,327,000) (12,090,000) 133,000

101,122,000

26,651,000

21,204,000

120,461,000

27,910,000

70,349,000

206,430,000

33,283,000

83,311,000

645,000 (1,840,000)

731,000

Net increase equivalents $2,882,000 $4,817,000 $2,407,000 (decrease) in 20

cash and cash

CONCLUSION Citi Incorporated company has evaluated its cash position through cash flow statement.It has earned profit and is in a position to invest further to increase its production.

This document prepared and presented by Business Resource Software, Inc.

Cash Flow Statement
The following is an example of a Cash Flow Statement. Click on any line item label and an explanation will be shown. This is a five year statement, however, your first year's projections should show monthly figures, the second year, quarterly and years three through five should show annual figures. 2008 Source of Funds Beginning cash Sales/Svcs Income Sale of Assets Customer deposits Loans 0 1,366,986 0 0 0 21 -11,767 2,662,548 0 0 0 143,765 3,416,123 0 0 0 416,274 4,565,616 0 0 0 924,480 5,981,959 0 0 0 2009 2010 2011 2012

Contributed Capital Available Cash Use of Funds Salaries Other operating expenses Loan payments Capital Expenditures Tax Payments Total Cash Out Net Cash Flow

400,000

$1,766,986 $2,650,781 $3,559,888 $4,981,890 $6,906,439

1,355,000 423,753 0 0 0

1,676,000 759,933 24,910 0 46173

2,044,000 900,245 99,640 0 99729

2,557,000 1,187,340 99,640 0 213430

3,355,000 1,533,432 99,640 0 277791

$1,778,753 $2,507,016 $3,143,614 $4,057,410 $5,265,863 ($11,767) $143,765 $416,274 $924,480 $1,640,576

Sector: Aviation BSE:532617 Market Lot: 1 Quotes Peer Group NSE:JETAIRWAYS Face Value: 10 Snapshot AGM/AM Charts MF Holding Bloomberg:JETIN@IN Reuters:JET.BO ISIN Demat: INE802G01018 Financials Discussion Forum Research BSE/NSE Notices Recent News BSE/NSE Deals

Financials (Standalone) Income Statement Balance Sheet Latest Quarterly/Halfyearly Ratio Analysis

22

Latest Quarterly/Halfyearly As On(Months) Sales of Products/Services Other Income Total Income Total Expenses OPBDIT Interest Depreciation Exceptional & Extraordinary Items Prior Period Adjustments Provision for Tax After Tax Profit Equity Capital Reserves Notes to Accounts Income Statement 31-Mar09(12) Profit / Loss A/C Net Sales (OI) Material Cost Increase Decrease Inventories Personnel Expenses Manufacturing Expenses Gross Profit Rs mn %OI 31-Mar08(12) Rs mn %OI 30-Sep-2009(3) 20201.10 559.50 20760.60 22807.80 -2047.20 2365.40 2358.70 -344.70 0.00 0.00 -4066.90 863.30 0.00 Click here

Detailed Quarterly 30-Sep-2008(3) 30803.70 1367.00 32170.70 36800.80 -4630.1 1564.60 2082.10 0.00 0.00 -1939.70 -3845.30 863.30 0.00 Click here % Change -34.42 -59.07 -35.47 -38.02 -55.78 51.18 13.28 ---5.76 0.00 --

31-Mar07(12) Rs mn %OI

114769.80 100.00 929.20 0.00 0.81 0.00

87711.00 100.00 950.00 0.00 1.08 0.00

70051.30 100.00 687.50 234.20 9381.20 29301.00 30447.40 0.98 0.33 13.39 41.83 43.46

14105.00 12.29 60439.90 52.66 39295.70 34.24 23

12051.80 13.74 40583.20 46.27 34126.00 38.91

Administration Selling and Distribution Expenses EBITDA Depreciation Depletion and Amortisation EBIT Interest Expense Other Income Pretax Income Provision for Tax Extra Ordinary and Prior Period Items Net Net Profit Adjusted Net Profit Dividend - Preference Dividend - Equity Balance Sheet

42363.20 36.91 -3067.50 8998.10 -2.67 7.84

32650.50 37.23 1475.50 7778.00 -6302.50 4927.50 7798.60 -3431.40 -1595.30 -694.50 -2530.60 -1836.10 0.00 0.00 1.68 8.87 -7.19 5.62 8.89 -3.91 -1.82 -0.79 -2.89 -2.09 0.00 0.00

27816.20 2631.20 4141.00 -1509.80 2401.50 4424.90 513.60 234.20 0.00 279.40 279.40 0.00 518.00

39.71 3.76 5.91 -2.16 3.43 6.32 0.73 0.33 0.00 0.40 0.40 0.00 0.74

-12065.60 -10.51 7380.30 3099.00 6.43 2.70

-16346.90 -14.24 -672.80 -0.59 11650.70 10.15 -3343.30 -2.91

-14994.00 -13.06 0.00 0.00 0.00 0.00

31-Mar-09 %BT 31-Mar-08 %BT 31-Mar-07 Equity Capital Preference Capital Share Capital Reserves and Surplus Loan Funds Current Liabilities Provisions Current Liabilities and Provisions Total Liabilities and Stockholders 863.30 0.00 863.30 0.37 0.00 0.37 863.30 0.00 863.30 0.42 0.00 0.42 863.30 0.00 863.30

%BT 0.80 0.00 0.80 20.05 56.47 17.27 2.31 19.59

33320.60 14.36 44653.20 21.57 21509.20 160485.30 69.17 116025.40 56.04 60563.00 32815.00 14.14 37890.80 18.30 18526.40 1788.30 0.77 1892.40 0.91 2481.60

34603.30 14.91 39783.20 19.21 21008.00

232022.50 100.00 207052.40 100.00 107254.10 100.00 24

Equity (BT) Tangible Assets Net Intangible Assets Net Net Block Capital Work In Progress Net Fixed Assets Investments Inventories Accounts Receivable Cash and Cash Equivalents Other Current Assets Current Assets Loans & Advances Miscellaneous Expenditure Other Assets Total Assets (BT) 161666.00 69.68 139428.30 67.34 31413.50 953.40 0.41 1413.40 0.68 1561.40 29.29 1.46 30.74 37.24 67.99 0.64 4.09 5.63 10.22 0.00 19.95 11.42 0.00

162619.40 70.09 140841.70 68.02 32974.90 5831.70 2.51 12232.80 5.91 39945.20

168451.10 72.60 153074.50 73.93 72920.10 17450.00 5956.70 7322.50 13945.00 0.00 7.52 14753.50 2.57 5450.30 7.13 2.63 6.34 689.30 4389.90 6039.00

3.16 13137.30 6.01 0.00 8551.40 0.00

4.13 10966.40 0.00 0.00

27224.20 11.73 27139.00 13.11 21395.30 16282.80 2614.40 7.02 12085.40 1.13 0.00 5.84 12249.40 0.00 0.00

232022.50 100.00 207052.40 100.00 107254.10 100.00

Ratio Analysis As on 31-Mar-09 31-Mar-08 31-Mar-07

Return Related Return on Total Assets (%) Return on Networth (%) Return on Capital Employed (%) -6.10 -45.90 -5.90 -3.80 -4.00 --1.80 1.20 3.30

Profitability 25

Gross Margin (%) Operating Margin (%) Net Profit Margin (%) Adjusted Net Profit Margin (%) Asset Turnover(x)

34.20 -10.50 -2.90 -13.10 0.60

38.90 -7.20 -2.90 -2.10 0.70

43.50 -2.20 0.40 0.40 0.90

Leverage Debt/Equity ratio (x) Total Debt/Total Assets (x) Long term Debt/Networth (x) Interest Coverage (x) 4.70 0.80 4.60 -0.40 2.50 0.70 2.40 0.30 2.70 0.70 1.40 1.10

Liquidity Current Ratio (x) Quick Ratio (x) Cash Ratio (x) 0.80 0.60 0.40 0.70 0.60 0.20 1.10 0.90 0.60

Working Capital Working Capital to Sales (x) Working Capital Days (days gross sales) Receivables (days gross sales) Creditors (days cost of sales) FG Inventory (days cost of sales) RM Inventory (days consumption) --17.80 23.30 68.80 ---0.10 -44.70 54.70 118.50 ---14.90 31.50 69.10 ---

26

Cash Flow Indicator Operating Cash Flow/Sales (%) -3.30 9.80 9.80

Per Share Book Value Per Share (Rs) Earnings Per Share (Rs) Dividend Per Share (Rs) 138.90 -46.60 -198.10 -29.30 -225.70 3.20 6.00

Growth(%) Total Operating Income EBITDA EBIT Net Profit 30.85 N.M. 91.44 32.11 25.21 -43.92 317.44 N.M. 24.08 -71.66 N.M. -93.82

CONCLUSION Business resource software,inc. has increased its liquidity from 0.70 in 2008 to 0.80 in 2009,and its working capital has reduced to 74.30 from 128.40 and further earned profitability in 2009. Consolidated Statements of Cash Flows for the years ended March 31, (million dollars) Operating Activities: Net Income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Share-based compensation
27

2009

2008

$1,281 $1,163

165 1

149 3

Income tax expense Income on investments Changes in working capital, net of acquisition Trade accounts receivable Prepayment and other assets Unbilled revenues Trade payables Client deposits Unearned revenue Other liabilities and provisions Cash generated by operations Income taxes paid Net cash provided by operating activities Investing Activities: Payment for acquisition of business, net of cash acquired Expenditure on property, plant and equipment Loans to employees Non-current deposits with corporations Acquisition of minority interest in subsidiary Income on investments
28

194 (3)

171 -

(81) 11 (58) (6) 10 89 1,603 (194) 1,409

(211) (49) (41) 7 1 (6) 109 1,296 (137) 1,159

(4) (285) (1) (20) 3

(26) (373) 1 (7) (6) -

Investments in available-for-sale financial assets Redemption of available-for-sale financial assets Investments in certificates of deposits Redemption in certificate of deposits Net cash used in investing activities FINANCING ACTIVITIES: Proceeds from issuance of shares on exercise of employee stock options Payment of dividends Net cash used in financing activities Effect of exchange rate changes on cash Net increase in cash and cash equivalents during the year Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Supplementary information: Income taxes paid

(186) 202 (41) 41 (291)

(511) 500 (422)

14 (559) (545) (464) 573 2,058

15 (209) (194) 121 543 1,394

$2,167 $2,058

$1

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CHAPTER-3

FUND FLOW STATEMENT

A summary of a firms changes in financial position from one period to another; it is also called a sources and uses of funds statement or a statement of changes in financial position. Has been replaced by the cash flow statement (1989) in U.S. audited annual reports. As the words indicates fund flow refers to the changes in fund (i.e. Working capital) by a business transaction There is always a flow of fund (change in working capital) by these business transaction which:

(a) Increase the current assets but do not bring any increase in current liabilities and vice-versa. As the words indicates fund flow refers to the changes in fund (i.e. Working capital) by a business transaction . 30

(b) Decrease in current assets but do not bring any decrease in current liabilities and vice-versa

Hence, the difference between the two (current asset &current liabilities) is called working capital

USES OF FUNDS FLOW STATEMENT

Fund Flow Statement helps the financial analyst in having a more detailed analysis and understanding of changes in the distribution of resources between two balance sheet dates. The uses of funds flow statement can be put as follows:

1)It explain the financial consequences of business operations:

Fund flow statement provides a ready answer to so many conflicting situations such as: a)Why the liquid position of the business is becoming more and more unbalanced in spite of business making more and more profits? b)How was it possible to distribute dividends in excess of current earnings or in the presence of a net loss for the period? c)Where have the profits gone?

2)It answers intricate queries:

The financial analyst can find out answers to a number of intricate questions: a)What is the overall credit worthiness of the enterprise? b)What are the sources of repayment of the loans taken? 31

c)How much funds are generated through normal business operations?

3)It acts as instrument for allocation of resource:

A projected funds flow statement will help the analyst in finding out how the management is going to allocate the scarce resources for meeting the productive requirements of the business.

4)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 during a particular period.The adequacy of working capital will tell the financial analyst about the possible steps that the management should take for effective use of surplus working caital or make arrangement in case of inadequacy of working capital.

Parties involved in fund flow analysis

Fund Flow Statement is useful for different parties interested in the business.They include owners or shareholders, financial instsitutions, employees,etc

1)Owners or Shareholders.
Owners or Shareholders are interested in ascertaining the financial position of business.They are helped to find out: a)Whether the business has enough funds to pay them dividends at reasonable rates? b) Whether the business is in a position to meet its present liabilities in time?and c) Whether the management is making effective use of funds at their disposal?

2)Financial institutions.
32

The financial institutions are interested in the safety of their funds.A careful analysis of the funds flow statement will help them in ascertaining: a)Overall creditworthiness of the enterprise; b)The resources from which the enterprise will be in a position to make repayment of the loan taken.

3)Employees:
The employees have also a stake in the business.Their growth and security of job depend upon the profitability of the firm which is directly related to effective utilization of funds by enterprise.

LIMITATIONS OF FUND FLOW ANALYSIS

The funds flow statement suffers from the limitations:

1)Not a substitute for an income statement: sThe funds flow statement simply tells about the working capital position of the working capital position of thebusiness.It does not explain how much profit the business has really earned. 2)Limitations of financial statements: Funds flow statement is prepared on the basis of financial statements. i.e. income statement and the balance sheet for two or more periods.The financial statements are subjected to several limitations,such as a)they disclose only monetary transactions, b)they are based on only recorded facts
33

3)Misleading The funds flow statement may prove to be misleading .A heavy balance Of working capital does not necessarily mean that the business has made large profits.

FORMAT OF SCHEDULED CHANGE IN WORKING CAPITAL

WORKING END CAPITAL OF THE YEAR ES CURREN PREVIOUS INCR DECREASE( T YEAR YEAR (Rs.) EASE (Rs.) Rs.) (Rs.) CURRENT ASSETS ---------------TOTAL( A) CURRENT LIABILITIES ---------------------------34 ------------------------------------------------------------------------------CHANG

-----TOTAL( B) WORKING CAPITAL(A-B)

-----

-----

-----

------

INCREASE/DECREASE IN WORKING AL CAPITAL

TOT -------

-------

CURRENT ASSETS AND LIABILITIES EXTRACTED FROM THE COMPARATIVE BALANCE SHEET OF X LTD. FOR 2002 & 2001:

CURRENT ASSETS
PARTICULARS CASH IN HAND BILLS RECIEVABLE BOOK DEBTS STOCK INVESTMENT PREPAID EXP. 2001 3000 6000 20000 28000 6000 1200 2002 4000 8000 25000 35000 3000 400

TOTAL

64,200

75,400

35

CURRENT LIABILITIES
PARTICULARS BILLS PAYABLE CREDITORS PROVISION FOR TAX OUTSTANDING EXP. RESERVE FOR D/D 2001 4000 16000 8000 200 2000 2002 3000 17000 5000 400 3000

TOTAL

30,200

28,400

36

Why Examine the Flow of Funds Statement The Flow of Funds Statement:
u Includes important non-cash transactions while the cash flow statement does not. u Is easy to prepare and often preferred by managers for analysis purposes over the more complex cash flow statement. u Helps you to better understand the cash flow statement, especially if it is prepared under the indirect method.

Flow of Funds Statement

What are funds? All of the firms investments and claims against those investments. Extends beyond just transactions involving cash. In order to prepare a fund flow statement ,it is necessary to find out the sources and uses of funds.

SOURCES OF FUNDS :Sources of funds can be both internal and external. 1)Internal Sources :Funds can from operations is the only internal source of funds .However ,following adjustments will be required in the figure of net profit for finding out real funds from operations:

Add the following items as they do not result in outflow of funds: a) Depreciation on fixed assets. b) Preliminary expenses or goodwill, etc, written off 37

c) Contribution to debenture redemption fund, transfer to general reserve,etc,if they have been deducted before arriving at the profit of figure. d) Provision for taxation and proposed dividend are usually taken as appropriations Of profits only and not current liabilities for the purpose of fund flow statement e) Loss on sale of fixed assets

2) External Sources: These sources include: a) Funds from long term loans :long term loans such as debentures ,borrowings from financial institutions will increase the working capital and ,therefore ,there will be flow of funds. b) Sale of fixed assets: sale of land , building ,long term investments will result in generation of funds. c) Funds from increase in share capital :issue of shares for cash or for any other current asset result in increase in working capital and hence there will be flow of funds

USES OF FUNDS
Uses of funds:the uses to which funds are put are called Applications of funds Some of its purposes are as follows:a)purchase of fixed assests : purchase of fixed assets such as land , building,etc. results in decrease of current assers with out any decrease in current liabilities. b)payment of dividends: payment of dividends result in decrease of fixed liability and, therefore, it affects funds.

38

c)payment of fixed liabilities: payment of long term liability,such as redemption of preference shares result in reduction of working capital and hence it is taken as an application of funds. d)payment of tax liability: provision for taxation is generally taken as an appropriation of profit and not as an application of funds

Basic Sources and Uses Statement

SOURCES
Increase, Retained Earnings Decrease, Accounts Receivable Increase, Long-Term Debt Decrease, Cash + Cash Equivalents $ 53 16 77 10 $156

USES
Increase, Inventories Increase, Accumed Tax Prepay Decrease, Notes Payable Increase, Net Fixed Assets $80 1 5 70 $156

Adjusting the Basic Sources and Uses Statement

Recognize Profits and Dividends

Change in retained earnings is composed of profits and dividends. Source: Net Profit $91 Less Use: Cash Dividends 38 39

(Net) Source: Incr., R.E.

$53

Adjusting the Basic Sources and Uses Statement Recognize Depreciation and Gross Changes in Fixed Assets
Change in net fixed assets is composed of depreciation and fixed assets. Source: Depreciation $ 30 Less Use: Add. to F.A. 100 (Net) Use: Incr., Net F.A. $ 70

Sources and Uses Statement (Sources Side)

SOURCES
Funds provided by operations Net Profit Depreciation Decrease, Accounts Receivable Increase, Long-Term Debt Decrease, Cash + Cash Equivalents $ 91 30 16 77 10 $224

Sources and Uses Statement (Uses Side)

USES

40

Dividends Additions to fixed assets Increase, Inventories Increase, Accum. Tax Prepay Decrease, Notes Payable

$ 38 100 80 1 5 $224

Analyzing the Sources and Uses Statement Sources

Primarily through net profit from operations and long-term debt increases.

Uses Primarily through an increase in inventories and expenditures on capital assets.

Flow of Funds Analysis - Big Declines in Credit Market Debt (except for Government) Thursday, September 17, 2009, 2:17 pm, by cmartenson

Nearly every day I am writing for enrolled members in the Martenson Insider area of the site. Here is an example from today. ~ Chris.

The Flow of Funds report covering the second quarter of 2009 (through June) was released today by the Federal Reserve and it revealed yet another retreat in total credit despite the heroic levels of state and federal government borrowing. 41

One of the better windows we have into the macro credit and borrowing universe is a quarterly report put out by the Federal Reserve called the "Flow of Funds" report. While it is a bit dated already (the report covers through the end of June) it is a great snapshot of the big trends and can tell us much about the general direction in which we are headed. This report was released today (9/17/2009) at 12:00 p.m. Here are a few of the fascinating findings While total credit market debt was down by -$122 billion from Q1 to Q2, or slightly less than a quarter of one percent overall, there was quite a bit of variability across all the sectors. A quick explanation: the Flow of Funds report has two main sectors; "non-financial" and "financial." In the non-financial sector (about 2/3rds of the total) we have households, nonfinancial businesses, and government (state and federal). In the financial sector (the remaining 1/3rd) we have banks, holding companies, insurance companies, and the like. Interestingly, the financial sector recorded an amazing -$493 billion dollar drop (or 2.9%) in the total amount of credit from the first quarter to the second. The non-financial sector, naturally, made up the difference and had a $316 billion dollar increase. However, there's a wrinkle to the story about this increase. It's a tale of two parts. The government part (state and federal combined) increased by +$390 billion while the household and business parts fell by -$74 billion. Summed together we get the $316 billion increase.

As I wrote a while back in one of the more important reports I wrote this year entitled "It's Not Over - The Collapse in Household Credit Says So" , the most important determinant of recovery will be whether or not consumer credit will expand. After all, since our money is debt, then increasing the amount of debt is an essential component of the very basis of our financial markets. After all, if everybody is expecting a few percent return on their bonds and equities, but the money supply is contracting, then quite a bit of disappointment is in store for whomever is expecting positive returns. For now, the government and the Federal Reserve, like nearly all of their major foreign counterparts, are busy stimulating and bailing and borrowing to fill the void left by the dearly departed corporate and public borrowers. These next two figures showing the year over year change in household vs. government borrowing tell nearly the entire tale.

42

43

That's the big story right there, in bold green and red lines. Households have reversed their previously uninterrupted, decades-long accumulation of ever more debt and government borrowing has countered this by a nearly ten to one margin. This is really just a continuation of yesterday's post about the cost of the recovery (The Recovery Cost Too Much), but I've been anxiously awaiting today's report so that I could show it to you in pictures.

Conclusion
The Flow of Funds report for 2Q 2009 reveals that credit market borrowing has been shrinking for nearly every sector but government. While it is certainly possible for the government to apply such Keynesian heroics for a while, it is also true that it cannot do so forever. Sooner or later the sputtering consumer portion of the economic engine is going to have to catch to life or the 44

government's efforts will prove to be an expensive and possibly dangerous miscalculation. Every report that you will soon read about a recovery in GDP must be assessed against the charts above. Can we really call an enormous increase in government borrowing the same thing as legitimate economic growth? If the answer is "yes" then why do we even bother with working for pay when the answer is that nobody needs to work and we can all live off of fat government contracts? Obviously that is a fantastically out-of-kilter world-view but if we are to count the next few positive GDP readings as real, then it means that we accept this view as legitimate. Since it is not possible for the government to become the perpetual source of all new borrowing, for the old economic paradigm to work it is imperative that consumers and businesses pick up the borrowing baton and race off with it. However, as many outside of the main economic echo chambers have already divined, it may simply be that there is a "new normal" out there that does not include a return to the former trajectory of borrowing. If so, then the government attempts to "plug the gap," while crossing their fingers and waiting for everyone to get back in the race, will fail.

I have resolved myself to a new normal, a much lower normal, and my main concern centers on whether the government will arrive at the same conclusion before the dollar is ruined, or after.

Coastal Roadways Ltd. - Research Center

s520131 COARO Group (T) BSE data Goes above Rs Goes below Rs View Tips Add to : Portfolio | Watchlist | Game Quarterly Half yearly Annual 45

Results

Statement

Balance sheet P&L Cash flow Dividend Share holding Capital structures Ratio

More

(Rs crore) Balance sheet Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Sources of funds Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus Loan funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Net current assets Current assets, loans & advances 14.81 46 12.54 13.15 10.48 10.50 29.57 9.91 19.67 0.10 30.77 8.94 21.83 0.10 26.04 8.85 17.19 0.10 22.93 7.87 15.06 0.10 21.59 7.22 14.37 0.23 8.16 1.15 20.63 12.89 1.25 25.10 7.19 1.26 19.29 4.52 1.38 16.44 3.29 2.93 17.64 4.15 7.18 4.15 6.81 4.15 6.69 4.15 6.39 4.15 7.28

Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total Notes: Book value of unquoted investments Market value of quoted investments SContingent liabilities Number of equity shares outstanding (Lacs) 0.46 41.47 0.59 41.47 0.69 41.47 0.39 41.50 0.05 0.18 1.31 41.47 13.94 0.86 20.63 9.37 3.17 25.10 11.15 2.00 19.29 9.20 1.28 16.44 7.46 3.04 17.64

CONCLUSION
In Coastal Roadways Ltd. I concluded that more funds are invested i.e 25.10 in 2008 from 16.44 in 2006 .This analysis is made to make effective use of working capital and for proper allocation of resources.

47