Report 1

A STUDY ON CASH FLOW AND FUND FLOW
DTL
CHAPTER 1 1.1 INTRODUCTION

Indian industries such as hydraulics aerospace, Automotive has been making rapid stride towards achievement of world class quality system by imbibing ISO 9000/QS 900quality system.
There components manufacture also produces highly engineered precision products in diverse business segments namely hydraulics aerospace, automotive and defense. International National standards are also kept in mind while producing these products. Dynamitic Technologies Limited (DTL) was incorporated on 8th March 1973 and promoted by Mr.J.K. Malhouthra. DTL was established with technical collaboration from Dowty Hydraulics unit Limited, UK it was the known as Dynamitic Hydraulics Limited.
With over three decades of manufacturing experience, vertically integrated with manufacturing facilities in two continents & global delivery in six continents and manufacturing product and delivery of services in each of business segment, this company is operating from the facilities in Bangalore, Chennai, Sweden and Bristol.
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1.2 INDUSTRY PROFILE

INTRODUCTION
The Indian hydraulic industry started in early sixties primarily with an objective of import substitution of some of the hydraulic products being used by the industry in various applications. Since most of the Indian industries have been set up, based upon the variety of technological sources, the range of their specifications is very wide. Due to this the range of products in the oil hydraulic industry is also quite wide resulting in a very small batch for each product. It is, therefore, difficult to specify a minimum economically viable capacity for the industry. While there has been a continued overall growth in the oil hydraulic products business due to large variety of specialized products to meet specific individual applications, volume growth in individual products has been very low. With low volumes and high development costs concerning tooling, casting and forging, the industry has not been able to adopt modern production methods. Current production technology in use is largely dictated by production volumes, quality requirements and costs.
Since the Indian industry has to manufacture a large variety of products with low volumes, the industry is not able to use the modern high production lines. Most the manufacturers, with exception to some (who have installed dedicated SPM's and CNC Machines for the manufacture of components), are currently using general purpose machines with special tooling and some special purpose machines for specialized metal cutting operations. Although the industry has shown a reasonable growth over the years, but it is still far away from the volumes which would lead to adopting modern production methods. Also the limited demand is being shared by over 20 firms resulting in uneconomical volumes for most of them. It is unlikely that the situation would change drastically in the coming decade due to variety of factors mentioned above.
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There are total fourteen key manufacturers of hydraulic components which can be categorized in four broad categories viz : A, B, C and others The seven manufacturers under category A provide for 29.3% of the total hydraulic market, the manufacturers under category B account for almost 32.3% of the total market while two manufacturers under the category C, namely L&T and BEML, manufacture components of value up to 29.6% of the total market for the captive plants with marginal sales to outside specialized customers applications like defense and others account for 8.7. Out of total production of approximately 5, 00,000 units per year, tractor pumps constitute 2, 50,000 units. If tractor pumps are excluded (for the purpose of this study), all other category of pumps share is 20% valves constitute 65%, cylinders 11%, motors 4%, and accessories constitute 5%. Within the valves category, Directional Control Valves share 50%, Pressure control valves 20%, flow control valves 70/ Mobile valves 5%, Check valves 5%, While cartrige valves, servo valves together are just 1% (of the total production by nos.). Industrial hydraulics (value wise) account for 42% of the market while mobile hydraulics account for major share of 58%. Within the Industrial sector, share of various segments is as follows : In the Industrial Hydraulics, the break-up of application Industry- Wise is : Machine Tools-18%, Plastics-13%, Steel Plants-30%, Material Handling-13% and Others 26%. In the Mobile Sector, the share of each type industry is: Earth Moving and construction-60% Mining-30% and Defence-10%.
HYDRAULICS Hydraulics is a topic of science and engineering dealing with the mechanical properties of liquids. Hydraulics is part of the more general discipline of fluid power. Fluid mechanics provides the theoretical foundation for hydraulics, which focuses on the engineering uses of fluid properties. Hydraulic topics range through most science and engineering disciplines and cover concepts such as pipe flow, dam design, fluid control circuitry, pumps, turbines, hydropower, computational fluid dynamics, flow
measurement, river channel behavior and erosion.
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Aircraft hydraulic and pneumatic assemblies comprise 6.7 percent of total industry shipments. The split between civilian and military hydraulic and pneumatic assemblies is 78 percent for civilian and 22 percent for military applications. Aircraft power transmission equipment comprises 6.1 percent of total industry shipments. The split between civilian and military power transmission equipment is 56 percent for civilian and 44 percent of military applications. AEROSPACE Aerospace comprises the atmosphere of Earth and surrounding space. Typically the term is used to refer to the industry that researches, designs, manufactures, operates and maintains vehicles moving through this air and space. Aerospace is a very diverse field, with a multitude of commercial, industrial and military applications.
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A STUDY ON CASH FLOW AND FUND FLOW CURRENT TRENDS IN THE INDUSTRY
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A number of regulatory and market access issues negatively affect the industry including the lack of harmonization in standards around the world, e.g., air worthiness and environmental standards; impediments to licensing and transferability of personnel between company sites in different countries; and the existence of international subsidy programs and various non-tariff barriers.
The manufacture of aircraft parts and auxiliary equipment encompasses a wide variety of manufacturing processes. The industry under pressure is to switch to alternative materials and processes, which comply with changing domestic and international standards. As well, the industry must develop more efficient and environmentally friendly aircraft parts products to meet increasingly stringent environmental standards aimed at reducing aircraft noise and engine combustion emissions.
Boeing, Raytheon and Lockheed Martin announced an Internet trading exchange for aerospace parts in March, 2006. Aerospace and defense companies will bid, buy and auction original airplane parts and replacement parts.
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CHAPTER 2 COMPANY PROFILE

2. a. BACKGROUND AND INCEPTION OF THE COMPANY Dynamatic Technologies Limited (DTL) was incorporated on 8th March 1973, promoted by Mr. J.K. Malhoutra. DTL was established with technical collaboration from Dowty Hydraulic Units Limited, U.K. it was then known as Dynamatic Hydraulics Limited. In 1984, it indigenised the technology and ended their collaboration with Dowty, becoming one of the key players in the hydraulics field in India and worldwide. Companys product range covers over 2800 varieties of Hydraulic Gear Pumps and Hydraulic Systems, which is their forte. They also have diversified applications in the Defence & Aerospace Sectors and in Metallurgy. With that start thirty-three years ago, they have now come a long way with ever increasing scale of operations and plans for expansion. Companys main manufacturing place as well as the Head Office is situated at Dynamatic Park, Peenya, Bangalore. They have two plants in Chennai and one plant in Swindon, United Kingdom.
2. b. NATURE OF BUSINESS CARRIED
With a proven track record spanning over a quarter of a century, they are now the largest producer of Hydraulic Gear Pumps in Asia. With state-of-the-art manufacturing facilities, and incorporation of the latest process technologies in precision engineering, they have diversified into a number of related areas like Aerospace and the Automotive Components sector, thus creating a unique, vertically integrated manufacturing structure. In addition to leading the Indian market with a share of 70 percent, company also have made a mark in the international arena as the fourth largest producer worldwide. They are the original equipment manufacturer for all the major tractor and earth moving equipment manufacturers in India like Mahindra & Mahindra, Eicher, Punjab Tractors, TAFE, DSCE-DOMS Page 6
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HMT, BEML, BHEL, Telco, Godrej & Boyce, Bajaj, Larsen & Toubro, Mackneill Engineering, Ingersoll Rand, Ashok Leyland, Hindustan Motors, Greaves, etc. In the recent past they have made in roads into the Aerospace and Defence sectors, expanding our horizons. The Pilotless Target Aircraft LAKSHYA, was a prestigious project for their aerospace division, where they manufactured its wings and rear fuselage. They have also bagged the National Award for Excellence in Indigenisation of Defence Equipment awarded by the Ministry of Defense. DTL now stand as a medium scale, precision engineering, ISO 9001 and ISO 14000 certified company.
2. c. VISION, MISSION AND QUALITY POLICY
VISION Companys vision is: Develop products and technologies in line with national priorities. Achieve global competence. To operate at the international level, to think global and to be the worlds largest producer of hydraulic gear pumps. Transform the organization into a knowledge based organization.
MISSION The Companys mission statement states that: It has been Companys endeavor to keep abreast of the changes, both technological and societal, while chalking out the growth chart. Be it the ISO 9000 certification for quality systems or the ISO 14000 certification for environmental standards, they believe that their role in society is that of a responsible and accountable organization that is actively contributing to the society. Companys value system too reflects the commitment to quality and innovation in a societal context. Company believes in: Integrity Page 7
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A STUDY ON CASH FLOW AND FUND FLOW Being a quality driven organization Being a knowledge based organization Raising the standard of living of all employees Being non parochial meritocracy HR Policy is an offshoot of this philosophy. It aims to
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Work towards a knowledge based organization, which believes in equal opportunities. Transcend all barriers of dogmatism. Align personal goals with the goals of the company, community, country and the world. Improve the standard of living of all of DTLs employees.
QUALITY POLICY Dynamatic technology limited is involved in the design and manufacture of highly engineered components and systems for Hydraulic, Aerospace and Automotive applications. 1. It is the policy to provide creative & innovative solutions to delight the customers at cost-effective prices on a continuous basis. 2. By delivering superior value to the customers, they will build a successful business model for themselves, capable of returning high yields to investors and improving the quality of life of all employees. 3. All processes will be eco-friendly and be designed to eliminate wastage, and all employees will strive to constantly expand the boundaries of knowledge through imagination and diligence. 4. This policy is implemented through the quality system, which operates in accordance with ISO 9001, the international quality standards.
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A STUDY ON CASH FLOW AND FUND FLOW 2. d. PRODUCT PROFILE
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DYNAMATIC HYDRAULICS Dynamatic Hydraulics is Asias largest producer of Hydraulic Gear Pumps, and one of the Top Five worldwide. Dynamatic also manufactures a wide range of sophisticated Hydraulic Valves and custom tailored hydraulic solutions extending from simple Hydraulic Pumping Units to sophisticated Marine Power Packs, complex Aircraft Ground Support Systems to turnkey industrial installations. All these products are produced at State-of-the-Art manufacturing facilities located at Bangalore, and assembly is done in an air-filtered environment to avoid initial contamination.
Applications in Agricultural Sector Hydraulic Gear Pumps manufactured by Dynamatic have varied applications including Agricultural Tractors. Dynamatic is an Original Equipment Supplier to all tractor manufacturers in India including Mahindra & Mahindra, Eicher Tractors, Punjab Tractors, Same Deutz-Fahr, Excorts Limited, Bajaj Tempo Limited, L&T John Deere, New Holland India, etc.
Applications in Industries The Company enjoys an overwhelming share of the Industrial Market for Hydraulic Gear Pumps in the country. Dynamatic pumps are used in Machine Tools and various other Fluid Power Systems. The Companys customers include BEML, Godrej & Boyce, Macneill Engineering, HMT, BHEL, Telco, Ashok Leyland amongst others.
Applications in Exports Dynamatic exports its products to over 30 countries and its export segment is growing rapidly with the turnover growing strongly over the past few years. Exports are expected to constitute 15-20 percent of the companys turnover, in the next 2 years. DSCE-DOMS Page 9
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Dynamatic products are used as Original Equipment in USA, UK, Canada and South Korea. The Company has developed specific products for use as Original Equipment in the tractor markets in USA, Germany, Mexico and Turkey.
Dynamatic Aerospace, a division of Dynamatic Technologies Ltd., a division of dynamatic Technologies Ltd, is a pioneer and a recognized leader in the Indian Private Sector for the development of complex aero structures. Instituted in 1995, this division is currently headed by Air Cmde. (Redt.) Ravish Malhotra, one of Indias two cosmonauts. Dynamatic Aerospace has closely partnered Agencies of national importance like Ministry of Defense, Hindustan Aeronautics Limited, and other defence establishments on key projects including the Lakshya. Indias Pilotless Target Aircraft.
HJT-36 Intermediate Jet Trainer and Sukhoi MKI 30 Fighter Bomber. Products include the Wing and Rear Fuselage of the LAKSHYA, Ailerons Flaps for the wings for the HJT36 and Fins, Ventral Fins, Slats, Vertical & Horizontal Stabilizer, Canards and Air Brakes for the Sukhoi 30 MKI fighter bomber.
Dynamatic Aerospace is considered to be one of the most reliable quality vendors to the DRDO and was presented with the Creative Partner Award for the year 1998-99 by DRDO, ADE and ASIEO. The Aircraft division of HAL in Bangalore also presented this division with the HAL Best Vendor Award for 2002-03.
Dynamatic Aerospace has the largest infrastructure in the Indian Private Sector for manufacture of exacting Air Frame Structures and Precision Aerospace Components. This is the first time such capabilities have been built in the Indian Private Sector. The Division is now consolidating its position through collaborations with International Aerospace majors on exports initiatives.
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A STUDY ON CASH FLOW AND FUND FLOW DYNAMETAL
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Dynametal, a division of Dynamatic Technologies, produces high quality Non-Ferrous Alloy and Castings for Industrial, Automotive and Aerospace Applications. Dynametal incorporates use of the latest metallurgical processes and differs radically from other conventional foundries as its heat treatment processes are designed to ensure castings are made with no inclusions, minimal melting loss and with the effective removal of gas from the metal. To achieve raw castings of high quality. Dynametal uses sophisticated machinery like tiltable gravity die casting machines, holding furnaces, impregnation plant, core shooters, sand core making facilities, leak testing machines and shot blasting machines. The division is capable of executing Aluminium Gravity Die Cast parts with intricate contours.
AUTOMOTIVE
JKM DAE Rim Automotive Limited, a subsidiary of Dynamatic Technologies Limited, produces high quality ferrous and non-ferrous engine and transmission components for the burgeoning global automobile industry. JKM Dae Rim is the single source supplier of a wide variety of critical engine and transmission parts, for the Hyundai Santro and Accent cars. The Company also caters to the requirements of other new generation cars and SUVs such as, TATA Indica and Sumo, FIAT Palio, Mahindra Scorpio, Volvo, etc. JKM DAE Rims association with internationally renowned, progressive automotive OEMs keeps it constantly geared to anticipate and fulfill the challenges posed by the Indian automobile industry. Further, by forging strong partnerships with the new generation automobile manufacturers like Hyundai, Telco and Fiat, JKM Dae Rim has established itself as a principal force in shaping the future of the Indian automobile industry.
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A STUDY ON CASH FLOW AND FUND FLOW PRODUCT PROFILE DIAGRAM
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PRODUCT PROFILE
HYDRAULICS
AEROSPACE
DEFENCE
Hydraulic Gear Pumps Tractor Hydraulics Hydraulic Suction and Delivery Pumps
Sheet metal components & machined components
Suction & Delivery Pumps & Distributor Mechanism for Tanks, Hydraulic Coupling For Tanks and Armored Vehicles
DYNAMETAL
AUTOMOTIVE
Production of Non-Ferrous Casting & Heat Treatment Facilities.
Production of engine and transmission components for automotive applications
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A STUDY ON CASH FLOW AND FUND FLOW 2. e. AREA OF OPERATION
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Dynamatic Technologies Limited has its operations in India as well as in abroad.
GLOBAL Dynamatic Technologies Limited has acquired the Hydraulic Business Division (Swindon Unit) of Sauer Danfoss Limited, UK. through its subsidiary Dynamatic Limited, UK.
NATIONAL The Company has its branches in the following cities.
New Delhi Ahmedabad Chennai Coimbatore Secunderabad Mumbai Pune Calcutta
2. f. OWNERSHIP PATTERN Dynamatic Technologies Limited (DTL), a public company was incorporated on 8th March 1973, promoted by Mr.J.K Malhoutra, present Chairman. DTL was established with technical collaboration from Dowty Hydraulic Units Limited, J.K. it was ten known as Dynamatic Hydraulics Limited. In 1984, it indigenized the technology and ended with their collaboration with Dowty, becoming one of the key players in the hydraulics field in India and world wide. The board of dynamatic comprises of nine directors, three of
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whom executive directors and size are non-executive directors including the chairman of the company, with the majority of them being independent directors. Chairman/Founder: Mr. J.K. Malhoutra Directors Mr. Vijay Kapur (Management Consultant) Dr. K.Aprameyan (Distinguished Technocrat) S. Krishnaswamy (Retd. Air Chief Marshal) Mr. N.R. Mohanty (Distinguished Technocrat) Dr. B. Seshanth (Company Executive)
President and Group CFO Mr. V. Sunder
Executive Director and COO Mr. N. Rajagopal
CEO and Managing Director Mr. Udayant Malhotra.
2. g. COMPETITORS INFORMATION
A few renowned companies which are manufacturing Hydraulic Gear Pumps are: 1. 2. 3. 4. 5. 6. 7. 8. Mico Eaton Rexroth Catching Hydraulics Company Ltd. Team Hydraulics Columbus Hydraulic Company Inc. Sun Hydraulics Myzak Hydraulics Page 14
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In the Aerospace Industry, D.T.L. is the monopolist as there are no other competitors in Airframe structures and precision aerospace components and D.T.L is catering more towards the Indian Aerospace industry and its clients are mainly H.A.L.
2. h. INFRASTRUCTURE FACILITIES
Aiming to achieve and sustain product excellence, DTL has cut no corners in establishing comprehensive world-class facilities for its entire range of products, the main assembly shops, the manufacturing and testing operations. DTL has got well equipped class rooms with the facilities of LCD, and OHPs, which are used to train the employees and trainee students. Internal Communication is usually through Inter Office Memos, which are sent to the required person/s/department. If the communication is intended for all the people in the company, it has to be put up on the notice board. They have three notice boards, one on the Hydraulics Shop Floor, one on the aerospace floor, the other on the first floor landing near the canteen and the third in the Aerospace Machine Shop.
TELEPHONES AND INTERCOM Company has three telephone lines. All incoming and outgoing calls are sourced through the EPABX at the reception. A few departments have direct external lines or can dial `0 to access external lines.
E-MAIL
Almost all the departments have access to e-mail. Check out with their Departmental Head whether the department has access to the Internet. Normally, based on the requirement of the department, their own personal email id with @dynamatics.net address is created within 3 working days.
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A STUDY ON CASH FLOW AND FUND FLOW QUALITY POLICY CARDS
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All employees are required to have one of our quality policy cards at all times within their premises. The Personnel Department will give the card at the time of joining.
STATIONERY
The Administration Department, which is adjacent to the time office, will help all requirements of stationery. This includes the companys letterheads, note pads, writing material, envelopes, etc.
CANTEEN
The canteen is located on the first floor, near the entrance to the Admin building. The food served at the canteen is subsidized, with the employee paying only a fraction of the actual cost; Coupons are used to keep a track on the usage of the canteen.
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A STUDY ON CASH FLOW AND FUND FLOW 2. i. ACHIEVEMENTS/AWARDS Companys Achievements and awards are: HAL Best Vendor Award for Dynamatic Aerospace 2003 DTL receives National Award for Excellence 2003.
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In 2001, Dynamatic was awarded the status of Recognized In-house R&D Unit, by the Department of Scientific and Industrial Research (DSIR), Government of India. LRQA approves DTLs Quality Management System 2000. Dynamatic exports its products to over 30 countries and its export segment. Dynamatic is the only Indian manufacturer of pumps in this segment and therefore, has a cost advantage over its competitors. It expects expanding activity in this segment over the next decade.
Dynamatic Aerospace has the largest infrastructure in the Indian Private Sector for manufacture of exacting Air Frame Structures and Precision Aerospace Components. Dynamatic is the market leader in the field of hydraulics. Dynamatic bags maiden order form John Deere, Germany 2003. Dynamatic Technologies Limited has acquired the Hydraulic Business Division (Swindon Unit) of Sauer Danfoss Limited, UK, through its subsidiary Dynamatic Limited, UK, on 15 June 2007.
Efficient collaboration for customer satisfaction 2003.
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A STUDY ON CASH FLOW AND FUND FLOW 2. j. WORK FLOW MODEL (END TO END)
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PURCHASE ORDER/JOB ORDER
PURCHASE DIVISION
VENDOR
STORES
QUALITY CONTROL
ACCOUNTS
COSTING
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A STUDY ON CASH FLOW AND FUND FLOW 2. k. FUTURE GROWTH AND PROSPECTS
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DTL is growing rapidly with the turnover growing strongly over the past few years. Exports are expected to constitute 15-20 percent of the companys turnover, in the next 2 years.
The company also expects to acquire better technologies to support overall business and gain overall in organic business growth with a better synergic effect.
Company looks forward to working closely with Northrop Grummans Electronic Systems sector to help meet the advanced technology aerospace and defense product and service needs identified by the Indian Ministry of defence going forward, a world-leading provider of advanced military radar, electronic warfare and other avionics systems.
Given the growing requirements developing in the Indian forces, we are delighted to be working with Northrop Grumman to identify and pursue opportunities to serve Indias defence needs, said Udayant Malhoutra, CEO and Managing Director of dynamatic Technologies Limited.
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CHAPTER 3 MCKENSYS 7S FRAME WORK

INTRODUCTION The 7S model is better known as McKensys. This is because of two persons who developed this model; Tom Peters and Robert Waterman were consultants at McKinsey & Co at that time. They published their 7s model in their articles structure is not organization and in their books the art of Japanese management and in search of excellence.
All the 7s elements can be found in the company strategies, corporate plans, organization structure and other documentations. According to the model, the seven basic dimensions, which represent the core of managerial activities are Strategy, Structure, Systems, Staff, Style, Skills, Shared values.
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A STUDY ON CASH FLOW AND FUND FLOW 3.1 STRATEGY
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Strategy refers to a coherent set of actions aimed at gaining a suitable advantage over competitors, improving positions of customers and allocation sources. Strategy is a long term goal that describes how a firm should operate to achieve its objectives. The company follows many strategies one among them is Waste Elimination.
Waste Elimination The Company has implemented the strategy of waste elimination by 5S Quality Systems By which the company has been able to eliminate wastage and improve utilization of all material resources and space. This has also helped in bringing about more orderliness and cleanliness in all processes carried out within the company. Based on Japanese words that being with `S, the 5S Philosophy focuses on effective work place organization and standardized work procedures. 5S simplifies your work environment, reduces waste and non-value activity while improving quality efficiency and safety. The 5S are:
1) Sort (Seiri) 2) Set in Order (Seiton) 3) Shine (Seiso) 4) Standardize(Seiketsu) 5) Sustain(Shitsuke)
Some of the other strategies with reference to DTL
Continuous efforts for developing innovative and cost effective products through constant research and development activities. To transform the company into a global R&D organization, with a pre-eminent market position in the hydraulic, Automotive and Defense sectors in Asia.
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Engaging all employees through participative management to instill a sense of ownership of all business process of the company. Design and redesign products that are safe, energy saving and environmental friendly. Practice open dialogue with employees, customers, government agencies, trade associations and with communities all around our facilities.
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A STUDY ON CASH FLOW AND FUND FLOW 3.2 STRUCTURE
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CEO & Managing Director
President & Group CFO
Executive Director & COO, Hydraulics & Dynametal.
Executive Director & COO, Automotive.
Vice President & COO, Aerospace.
Personal & administration
GM Production
SGM Operations
GM Dynametal; a GM Facility
Corporate planning
GM Marketing
AGM Materials
Secretarial
AGM Exports
DGM Production
AGM R&D
HR/Legal/ administration
AGM Exports
DGM Plant
SGM R&D
Corporate Communication
AGM Marketing
GM Compliance CS
AGM Productions
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A STUDY ON CASH FLOW AND FUND FLOW FUNCTIONAL DEPARTMENTS Finance Department
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Finance department is concerned with essential finance activity for organization to carry out their activities in effective way. This helps the organization to achieve soundness in working and dealing with others. The two important functions of finance department are head office collections and branch office collections.
Marketing Department
DTL has a strong marketing force to ensure an increasing trend of sales for its products by creating a demand at the market place. Marketing department takes a decision to market the new products on receipt of information from R&D with respect to technical clearance. The pricing policy of the product depends on detailed analysis of the costs. Costing department gets latest raw materials costs from materials department and once the details are received the data is entered in the costing package and the cost of the product is ascertained. After approving the ascertained cost by the higher level, marketing members along with the product team finalize the price of the product.
Human resource department
The workforce at the Dynamatics is competent, dynamic and committed to delivering premium quality to their customers. The present employee strength is 468, of which 348 are workmen and 120 are officers and managers. The company has close to 100 engineers and professionals from various disciplines on its roll. Personnel are recruited after being subject to meticulous tests and grueling interviews to assess their competence and expertise. Even so, freshly recruited technicians have to undergo intensive, hands-on training before assuming responsibilities.
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A STUDY ON CASH FLOW AND FUND FLOW Production Department
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Production department plays a very important role in the entire organization as such; it acts as a main centre of the whole organization by conveying the raw materials into finished products. This department is responsible in carrying out the production activity evenly and in most efficient manner.
Research and development department The companys focus on R&D has enabled the company to foray into providing new services and launch new products. The research and development centre at Dynamatics is completely electronic, utilizing state-of-art parametric 3D design programs and knowledge based expert systems. It has transformed itself into a knowledge-based organization through its sustained R&D efforts. In 2001, Dynamatics was awarded the status of recognized in-house and R&D unit; by the Department of Scientific and Industrial Research(DSIR), Government of India. Dynamatic has set up a virtual research lab in Tewksbury, England using collaborative product development technology over the web. 3.3 SYSTEM Internal Control System and their Adequacy The Company has deployed a comprehensive internal audit system, which is commensurate with the scale of operations. Competent and qualified professionals, who are external to the companys business, conduct regular and detailed audits, both at the manufacturing locations and its branch offices. The board level audit committee of the company meets at regular intervals to review internal control systems and take stock of the situation from time to time.
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A STUDY ON CASH FLOW AND FUND FLOW Steps in the system
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Overseeing the companys financial reporting process and the disclosure of its financial statement is correct, sufficient and credible. Recommending to the board, the appointment, re-appointment and if required, replacement or removal of the statutory auditor, fixation of audit fee as well as approval of payments to the statutory auditors for any other services rendered to the company.
Reviewing with the management the annual financial statements before submission to the board for approval. Reviewing with the management the performance of statutory and internal auditors, and adequacy of internal control systems of the company. Reviewing adequacy of internal audit function. Discussing with internal auditors about any significant findings and follow up thereon. Reviewing the findings of any internal investigations by internal auditors into matters where there is a suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting matter to the board.
Discussing with the statutory auditors before the audit commences about the nature and scope of audit as well as post audit discussion to ascertain any area of concern.
Reviewing the companys financial and risk management policies. To look into reasons for substantial defaults in payments to depositors or debenture holders, shareholders (in case of non-payment of declared dividends) and creditors, if any.
3.4 STYLE The organization follows Participative style of decision making process: As a process of good corporate governance for corporate affairs and all matters requiring discussion/decisions by the board/committee, the company has a policy for board and DSCE-DOMS Page 26
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committee meetings. This policy ensures that the decision making process at board/committee meetings is done in an informed, systematic and in the most efficient manner. All divisions/departments in the company are required to plan their functions well in advance, particularly with regard to mattes requiring discussions/approval/ decision in the board/committee meetings. All such matters are communicated to company secretary in advance so that it can be included in agenda for discussion, at the board/committee meetings their off. Developing and using top down/bottom up communication channels The communication needs were evolved over the years and refined based on experiences gained by leaders and the requirements of organization. Feedback for the improvement is taken from the employees perception survey. Top down communication Communication meetings (unit heads to functional heads, functional heads to Managers and executives, executives to supervisors and workers). Interoffice memos. E-mail and intranet websites. Bulletin board of departments. Notice boards.
Upward Communication Participative forum. Meeting with union & associations.
3.5 STAFF
Staffing is the process of acquiring human resources for the organization and assuring that they have the potential to contribute to the achievement of the organizations goals. Staffing is selecting people for specific organizational positions and developing in them the abilities and skills that they would need to be effective in those and subsequent
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assignments. The staffing function applies to the whole organization, i.e. it cuts across all organizational levels through the process may be different for different kinds of jobs.
The total number of staff in the company is 468, in which
DESIGNATION Top executives including CEO, MD, etc. Middle level managers which include HODs and supervisors. Workmen(employees)
No. of persons 20 120
328
The strength of DTL is the experience. Many of the employees working in the organization are employed working in the organization are employed for more than 10 years and the recruitment process in the last 10 years has been very less. Every employee is carrying with him a lot of experience. Other important strength of DTL is the employees association with the company, almost every employee working in DTL is proud to be working here which is a very important thing for the company. Other strengths include highly skilled and efficient employees.
Most important role of employees in the organization. There is no such most important role in DTL as every employees work is important. Still, only on some ground rules supervisors play very vital in the organization. They are directly responsible for every work performed in DTL they report to the superiors.
Most important people to the success of the business/organization. As said above, no single person is important as such in the success of an organization. Its a total team effort and every person in equally important for the success of the organization. Still on some grounds we can conclude that unit heads also play an
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important role. They play an important role and are also responsible for the overall performance of the unit as they delegate the authority and get the work done.
The most important concern for the quality of staff. The most important concern about the quality of the staff is the punctuality, sincerity, and productivity and last but not least their attitude. These factors directly affect the output of the organization-performance. Strengths of the organizations labor force. Labor force being the most important attribute of any organization, must be properly made use of and motivated. The strength of the labor force in DTL is their commitment and attitude. They have a positive attitude, and they know what they are supposed to do to make the organization a profit making one. They contribute well to the success of the organization.
3.6 SKILL Applicants with less than a years relevant experience are appointed as trainees. After training, the employee will be on probation for the prescribed period of time. The performance of the employee determines the duration of the training and the probation. Experienced candidates are appointed as probationers. The management will decide the period of the training/probation. Training on environmental issues. Basics of hydraulics and its application in pumps. Project management. Product design and development. Computer aided analysis. Quality management system First aid techniques and fire fighting. Computer literacy. Page 29
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A STUDY ON CASH FLOW AND FUND FLOW Disciplinary issues and procedures. Inter-personal skills Customer relationship management. Quality in Aerospace. Aircraft fasteners and installation techniques. Training on 5S quality systems. Inculcated disciplines on the legal requirements. Training as an incentive.
DTL
3.7 SHARED VALUE
Dynamatics long standing commitment to high standards of corporate governance and ethical business practices is a fundamental shared value of its board of directors, management and employees. The companys philosophy of corporate governance stems from its belief that timely disclosures, transparent accounting policies, and a strong and independent board go a long way preserving shareholders trust while maximizing long term shareholder value. Whilst simultaneously enabling the company to fulfill its obligations to other stakeholders such as customers, suppliers, financiers, employees, the government and to the society at large. The company firmly believes that such practices are founded upon the core values of transparency, professionalism, empowerment, equity and accountability.
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CHAPTER 4 SWOT ANALYSIS

A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm can be classified as strength (S) and weaknesses (W), and that external to the firm can be classified as opportunities (O) and threats (T). Such an analysis of the environment is referred to as SWOT analysis. The SWOT analysis provides information that is helpful in matching the firms resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan.
SWOT ANALYSIS
INTERNAL
EXTERNAL
STRENGTH
WEAKNESS
OPPORTUNITY
THREATS
SWOT Analysis of Dynamatic Technologies Limited
STRENGTHS The Company is Asias largest producer of Hydraulic Gear pumps and one of the top five worldwide. Company is not supplying hydraulic gear pumps to all 14 tractor manufacturers in India. Over 85 percent of all agricultural tractors and construction equipment produced in India are powered by pumps produced by Dynamatics Hydraulics. DSCE-DOMS Page 31
A STUDY ON CASH FLOW AND FUND FLOW Six-sigma problem-solving techniques have been employed. Excellent engineering laboratory. Single source suppliers.
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DTLs clients include global giants like John Deere-New Holland, Indian Army, Caterpillar, JCB, and Airbus etc,.
WEAKNESSES Currently as high as 29% of DTLs total raw material requirements is imported, increasing dependence on imports for raw materials is dangerous especially when the rupee is weak. Power intensive, dependant on power and any miscarriage here results in underutilization of capacity. Needs updating with the times in terms of plant and machinery. No funds raised on a short term basis which have been used only for long term investment.
OPPORTUNITIES The automotive components industry is poised to witness significant change over the next decade. The outsourcing boom in auto component industry offers great opportunities for growth. Company presently operates predominantly in the highway vehicle segment which is characterized by high volumes and thin margins. Company is continuing to develop numerous variants of pumps used in the industrial sector, with an aim of increasing penetration in this lucrative and growing market. With an aim to trap into the rapidly growing infrastructure sector, company is putting in serious R&D efforts, to develop a range of cast-iron body pumps. This will open up new revenue streams for your company. DSCE-DOMS Page 32
A STUDY ON CASH FLOW AND FUND FLOW THREATS Auto manufacturers replace metals with plastic.
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Company faces huge competition this leads to decreasing trend in performance because new players are engaged with new innovations and updating materials are brought to market.
Cost-push inflation, in terms of spiraling aluminum price increases, is a cause of concern.
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CHAPTER 5 ANALYSIS OF FINANCIAL STATEMENTS

Table 5.1: Consolidated profit and loss account for the year ended march 31, 2011. Particulars For the year ended 31st March 2011 Income Sale of manufactured products Less: Excise duty Net Sale of manufactured products Income from project execution services Service Income Other Income 4,817,658 304,843 4,512,815 436,558 1,022 86,387 5,036,782 Expenditure Cost of materials consumed Personnel expenses Other operating expenses 2,462,920 966,237 779,342 4,208,499 EBITD Depreciation Interest and finance charges Profit before minority interest and tax Provision for tax - current tax - minimum alternate tax credit - deferred tax charge - fringe benefit tax - Wealth tax Profit after tax and before minority 62,591 (6,432) 30,019 343 216,763 43,888 (11,928) 21,010 229 105,146 828,283 250,433 274,566 303,284 2,254,731 835,391 728,507 3,818,629 632,960 225,390 249,225 158,345 4,482,227 229,534 4,252,693 142,379 3.825 52,692 4,451,589 For the year ended 31st March 2010
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A STUDY ON CASH FLOW AND FUND FLOW Interest Minority interest Profit/(loss) for the year Balance brought forward from previous year Amount available for appropriate Dividend: - Interim Dividend - Proposed Dividend - Tax on Dividend Transferred to general reserve Balance carried forward 32,488 21,659 8,909 14,842 356,106 434,004 Earnings per share 40.03 434,004 216,763 217,241
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105,146 170,424
275,570
24,366 16,244 6,901 10,818 217,241 275,570 19.42
Graph 5.1: Graph showing Net Sales. Net Sales

5000000 4500000 4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 2006-07 2007-08 2008-09 2009-10 2010-11 Net Sales
Interpretation: The above graph shows the net sales from the year 2006-07 to 2010-11. It shows that Net sales are increasing year by year due to increasing sales and investment. DSCE-DOMS Page 35
A STUDY ON CASH FLOW AND FUND FLOW Graph 5.2: Graph showing Net Profit Margin
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Net Profit Margin

10 9 8 7 6 5 4 3 2 1 0 2006-07 2007-08 2008-09 2009-10 2010-11 Net Profit Margin
Interpretation: The above graph shows the Net Profit margin from the year 2006-07 to 2010-11. It shows that Profit is fluctuating year by year and there is huge decrease in the year 2008-09 due to increase in operating expenses of the company.
Graph 5.3: Graph showing Current Ratio. Current Ratio

0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2006-07 2007-08 2008-09 2009-10 2010-11 Current Ratio
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A STUDY ON CASH FLOW AND FUND FLOW Interpretation:
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The above shows the Current ratio from the year 2006-07 to 2010-11. The current ratio is fluctuating year by year due to the increase and decrease in the current assets and current liabilities. It indicates that the liquidity position of the company is fluctuating and reduced in 2010-11.
Graph 5.4: Graph showing Debt equity ratio. Debt equity ratio
2.5 2 1.5 Debt equity ratio 1 0.5 0 2006-07 2007-08 2008-09 2009-10 2010-11
Interpretation: The above graph shows the debt equity ratio from the year 2006-07 to 2010-11. The graph indicates that there is debt of the company is increased in the year 2007-08 and decreased in the next two years. The debt of the company is increased in the year 201011.
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CHAPTER 6 LEARNING EXPERIENCE

It was a great experience working in Dynamatic Technologies Ltd where I learnt many things about the functioning of an organization in accordance with the present market trends. I had learnt within the classroom being practiced in real life situation.
The main purpose of the organization study is to make acquainted with the practical knowledge about the overall functioning of the organization. It gave me an opportunity to study the human behavior and make myself ready for different situations, which normally would come across while in factory environment. It has given me lot of exposure as to the working of the organization.
In spite of their busy schedules the officers were very kind towards me to take time and explain to me the different concepts of the organization. It always gave me a useful insight into the topic. There is great attitude of the employees that keeps them into social fabric of a work place and greatly contributes to the success and heightened performance of the organization. Employees from every corner of the department helped me in getting required information for the successful completion of the project.
The atmosphere was so friendly and I did not feel any difficulty during the period of ten weeks which gave me a great information and knowledge as to how an organization really functions. All in all, it was life time experience to be at Dynamatic technologies Ltd. It was a wonderful experience.
Finally I would like to conclude that this in-plant training provided me a greatest opportunity to analyze cash flow and fund flow statements of Dynamatic Technologies Ltd for last 5years.
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CHAPTER 7 GENERAL INTRODUCTION

FUND FLOW ANALYSIS: The Fund flow analysis is undertaken to highlight changes in the financial condition of a business concern over a given period of time. The fund flow statement is a statement, which shows the movement of funds and is a report of the financial operations of the business undertaking. It indicates various means by which funds were obtained during a particular and the ways in which these funds were employed. In simple words, it is a statement of sources and applications of funds.
This statement is derived from an analysis of the changes that have occurred in the assets and liabilities between the 2 balance sheet dates. With the help of this statement, an analyst can judge the liquidity position of the company, and the spending and financing habits of the management.
In several instances, a company has a fairly good earning record; yet it may experience a shortage of liquid resources, which may often impel it towards liquidation. Contrary to this, despite low profits, a company may be placed comfortably with respect to working capital. Furthermore, the funds flow statement provides an insight in to the financing pattern of an enterprise.
An analysis of the major sources of funds in the past reveals what portion of the growth was financed by internal resources and what portion by external resources. It shows whether the Company has been expanding its scale of business by business by building up additional plant and equipment or by increasing its sales, or whether it is involved in purely routine affairs of distributing dividends and redeeming long-term debts. Funds refer to money values in whatever forms it may exit. Here funds means all financial resources, used in business whether in the form of men, material, money, DSCE-DOMS Page 39
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machinery and others. Funds also means working capital. The working capital concept of funds has emerged due to the fact that total resources of a business are invested partly in fixed assets in the form of fixed assets capital and partly kept inform of liquid or near liquid form of as working capital. There are 3 concepts of the term funds:
1.
The Total resources concept.
2.
The Working capital concept.
3.
The Cash concept.
According to Total Resources Concept all the changes that result in an increase in the funds of the firm constitute sources of funds. Generally, funds flows in a business firm are from the following sources:
The earnings of the enterprise. Expansion in liabilities through increased use of borrowed funds or increased trade credit. Decrease in assets such as liquidation of current assets, sale of fixed, miscellaneous or tangible assets, and earned depreciation on such assets. Contribution of additional funds by the owners f the firm.
The use of funds side of the funds statement depicts all such changes as cause a decrease in the total funds of the business. The following items are shown on the uses column of the statements:
Decrease in liabilities Increase in Assets Decrease in Capital funds Net losses. Page 40
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FLOW OF FUNDS: The term flow means movement and includes both inflow and outflow. Flow of funds is said to have taken place when any transaction makes changes in the amount of funds available before happening of the transaction. If the effect of transaction results in the increase of funds, it is called a source of funds and if it results in the decrease of funds, it is known as an application of funds, further, in case the transaction does not change funds, it is said to have not resulted in the flow of funds.
FLOW OF FUNDS
NO
YES
When both current or Non-current accounts are involved
When one current & noncurrent accounts are involved
According to working capital concept of funds, the term flow of funds refers to the movement of funds in the working capital. If any transaction results in the increase in working capital, it is said to be a source or inflow of funds and if it results in the decrease of working capital, it is said to be an application or outflow of funds.
A fund flow statement is an essential tool for the financial analysis and is of primary importance to the financial management. Now-a-days it is being widely used by the financial analysis, credit granting institutions and financial managers. The basic purpose Page 41
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of a fund flow statement is to reveal the changes in the working capital on the two balance sheet dates.
It also describes the sources from which additional working capital has been financed and the use to which working capital has been applied. Such a statement is particularly useful in assessing the growth of the firm, its resulting financial needs and in determining the best way of financing these needs. By making use of projected funds flow statements, the management can come to know the adequacy or inadequacy of working capital even in advance. One can plan the intermediate and long-term financing of the firm, repayment of long-term debts, expansion, of the business, allocating of resources, etc.
USES OF FUNDS FLOW STATEMENT
Funds flow statement helps the financial analyst in having a more detailed analysis and understanding of changes in the distribution of resources between 2 balance sheet dates. In case such study is required regarding the future working capital position of the company, a projected funds flow statement can be prepared.
The uses of a funds flow statement can be put as follows: It explains the financial consequences of business operations, Funds flow statement provides a ready answer to so many conflicting situations, such as:
Why the liquid position of the business is becoming more and more unbalanced in spite of business making more and more profits?
How was it possible to distribute dividends in excess of current earnings or in the presence of a net loss for the period?
It acts as an instrument for allocation of resources: A projected funds flow statement will help the analyst in finding out how the management is going to allocate the scarce Page 42
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resources for meeting the productive requirements of the business. The uses of funds should be phased in such an order that the available resources are put to the best use of the enterprise. The funds should be managed in such a way that the business is in a position to make payment of interest and loan installments as per the agreed schedule.
It is a test as to effective or otherwise use of working capital: Fund flow statement is a test of effective use of working capital by the management during a particular period. The adequacy or inadequacy of working capital will tell the financial analyst about the possible steps that the mgmt should take for effective use of surprise working capital or make arrangement in case of inadequacy of working capital.
ADVANTAGES:
Since it gives the figures of cash inflow from operations, it gives much more reliable picture of the results of operations than the usual profit and loss account. Changing the amount of depreciation can easily change the figure of profit. Higher depreciation will mean lower profit and vice versa.
Since cash or funds are the basis for carrying on operation, the funds flow statement, prepared on an estimated basis for the next period will enable a firm, to plan its financial operations properly. The firm will know how much funds it required, how much it should make arrangements from outside. This is a process of budgeting.
The statement for the previous year compared with the budget prepared before the year commenced will show to what extent the resources for the company or the firm were used according to plan to what extent the utilization was unplanned or not proper.
The funds flow statement cannot take the place of the final statements of accounts the Balance Sheet or the Profit and Loss Account but it is most useful supplementary statement. DSCE-DOMS Page 43
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LIMITATIONS: It should be remembered that a funds flow statement is not a substitute of an income statement of a balance sheet. It provides only some additional information as regard changes in working capital. It cannot reveal continuous changes. It is not original statement for re-arrangement of data given in the financial statement.
CASH FLOW ANALYSIS
Cash flow signifies the movements of cash in and out of a business concern. While the inflow of cash is a source of cash, the outflow of cash is a use of cash. Thus a cash flow statement is a statement of changes in the financial position of firm on cash basis.
Importance of Cash Flow Statement: Cash Flow Statement is highly useful for the evaluation of the cash position of the concern as it is based on the cash basis of accounting. It is highly useful and appropriate for short-term financial planning. It helps the management to evaluate the ability of the concern to meet its obligations such as payment of creditors, repayment of bank loan, payment of interest, taxes and dividends, etc. The trend of a firms liquidity can be determined with the help of a series of intrafirm and inter-firm cash flow statements. It helps for making appraisal of various capital investment projects just to determine their viability and profitability. It is highly useful to external analysts like bankers for reviewing the financial position of the borrowers. It is used to explain the substantial profits and poor cash position. DSCE-DOMS Page 44
A STUDY ON CASH FLOW AND FUND FLOW Limitations:
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Although cash flow statement reveals the inflow and outflow of cash, it excludes the near cash items from cash. This obscures the true reporting of the firms liquidity position. The term `cash cannot be precisely defined. There are controversies over a number of items such as cheques, stamps, postal orders etc., to be included in cash. Cash flow statement is not a substitute for income statement as both of them have separate functions to perform. As working capital is a wider concept of funds, a funds flow statement presents a more complete picture than cash flow statement.
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A STUDY ON CASH FLOW AND FUND FLOW 7. a. REVIEW OF LITERATURE
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This paper demonstrates that current cash flow statement classification rules under Statement No. 95, Statement of Cash Flows (SFAS-95, 1987), are simplistic and wrought with internal contradictions. As a result, net cash flow from operating activities (NCFO) is often contaminated by the cash flow effects of certain investing and financing transactions, including the income tax effects of those transactions; and a similar contamination often results in net cash flow from investing activities (NCFI), and net cash flow from financing activities (NCFF). It also demonstrates a priori that reporting gross operating inflows and outflows under the method with a supplemental reconciliation of net income and NCFO is more informative than reporting NCFO under the method. Hugo Nurnberg (October 2006).
A cash flow statement is required as part of a complete set of financial statements prepared in conformity with IFRS as well as US GAAP for all business enterprises. IAS 7 lays down a formal structure for the cash flow statement. Cash flows should be classified under the following three standard headings: Operating activities, Investing activities, Financing activities. The classification of cash flows among operating, investing and financing activities is essential to the analysis of cash flow data. Net cash flow (the change in cash and equivalents during the period) has little informational content by itself; it is the classification and individual components that are informative. Jaan Alver (2005).
The correct definition and calculation of the free cash flows plays a crucial role in the process of valuing companies. The two main components of a valuation model, free cash flow and the costs of capital, need to be determined simultaneously. The different approaches to valuation are different in the way they integrated the tax shields from debt financing. Each approach requires its specific definition of both cash flows and the cost of capital. Both the DCF-Model for valuation and the cash flow statement are based on the equivalence of the sources and uses of funds. For valuation purposes, the cash flows DSCE-DOMS Page 46
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needed for valuation should be defined consistently and determined by the use of the cash flow statement. This paper derives these definitions and discusses specific problems in the use and design of the cash flow statement as a means of valuation. Wolfgang Schulzte (2005).
This paper will answer question related to cash flow statement. The question has two parts. The first part asks, What is the purpose of the statement of cash flows? The second part of the question asks, What information does it (the statement of cash flows) provide? This paper will also include an explanation of why statements of cash flows are important when assessing the financial strength of an organization. According to the text, the main purpose of for the statement of cash flows is to provide information about an entitys cash receipts and cash payments during a period. A secondary, but still important, reason for the statement of cash flows is also mentioned in the text. The statement of cash flows provides information on a cash basis about an organizations operating, investing and financing activities. Kieso (2004).
This paper studies the incentives of German firms to voluntarily disclose cash flow statements. Although cash flow statements have not been mandatory in Germany until recently, an increasing number of firms have voluntarily provided cash flow statements. These firms are likely to be influenced by recommendations of the German accounting profession, IAS 7, and the respective standards of other countries. This paper studies this influence by looking at the adoption pattern of the cash flow statement over time, and ist format. It uses milestones in the evolution of German professional recommendations and respective international standards to chart the development of voluntary cash flow statements. The paper analyzes the cross-sectional determinants of voluntary (international) cash flow statements using regressions and factor analysis. The results support the idea that capital-market forces drive the disclosure of cash flow statements that conform with international reporting practice. Christian Leuz (2002).
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A STUDY ON CASH FLOW AND FUND FLOW 7. b. STATEMENT OF THE PROBLEM
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Fund flow and Cash Flow are the crucial functions of the top level management. This study is an attempt to understand the sources and deployment of funds by the Dynamatic technologies Ltd. For example: we get answers to the following questions:
1. Does the business have adequate working capital to operate the business? 2. What are the sources from which funds are raised in the business? 3. How have the generated funds been utilized? 4. How much funds generation through normal business operation? 5. Where have the profit gone? 6. In what way the management has utilized the funds in the past and what are going to be likely uses of funds?
7. c. OBJECTIVES OF THE STUDY To study the changes in working capital during the last few years in the company and the reason for the changes in working capital To study the various sources from which the funds are raised and the application of those funds in the company. To study the cash flows and its impact on top line and bottom line. To evaluate the financial statements of the company over the past 5 years.
7. d. SCOPE OF THE STUDY
Scope of the study in general terms means the extent to which it is possible to cover the subject. This study attempts to cover some of the tools and techniques for the purpose of evaluating the cash flows and fund flows at Dynamatic Technologies Limited, Bangalore. However the following areas are covered: DSCE-DOMS Page 48
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Trend analysis is done to know the performance of the company over a number of years. Study is done for a period of 5 years from 2006-07 to 2010-11. Study and analysis of Cash flow and Fund flow statements of Dynamatic Technologies Limited for a period of 5 years from 2006-07 to 2010-11.
7. e. SOURCES OF DATA
As the data is related to analysis and interpretation of financial performance there was no need for the collection of structured data. For collected from various sources they are,
Secondary Data Secondary data are those data that have been compiled already before conducting the research. Secondary data may be internal data as well as external data. Internal data are collected from the companys records. External data are collected from outside the company. The various sources of secondary data are, Annual reports and financial statements of the company like balance sheet and profit/loss account. Various publications and manuals of Dynamatic Technologies Limited. Books, magazines and news papers. Company websites.
7. f. METHODOLOGY
Research Methodology is a systematic way for solving any research problem. It studies the various steps that are generally adopted by the researcher in studying research problem. The methodology Adopted for the study includes the following steps: DSCE-DOMS Page 49
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Detailed discussion with the officials and other personnel of financial departments is done to obtain the clear picture about the working of department. Trend Analysis various years annual reports to study the financial performance of the company from 2006-07 to 2010-11. Correlation and regression between share price of the company in past five years with other financial performers. Correlation and regression between the net sales of the company and the various cash flows and the funds.
7. g. LIMITATION OF STUDY
The efforts have been made to study completely and as exhaustively as possible. However the following problems/limitations were faced during the study is as follows: Figures for the analysis are taken from annual reports. The study is limited only for 5 years hence broad generalization about the company is not possible. The study is based on the data given by the officials and reports of the company and assumed to be true. As the study time available is limited and the subject is vast the study is confined only to the main financial statements only.
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CHAPTER 8 ANALYSIS AND INTERPRETATION

8.1 INTRODUCTION The analysis and interpretation of financial statements is used to determine the cash flows and fund flows and the sources of funds and deployment of funds and results of operations as well. A number of methods are used to study the statements.
FUND FLOW STATEMENT FOR THE YEAR 2011
Table 8.1: table showing fund flow statement for the year 2011 Schedule of Working Capital changes Particulars Current Assets: Inventories Sundry Debtors Cash/Bank Balance Other Current Assets Loans and Advances Total (A) Current Liabilities: Liabilities Provisions Total (B) Working Capital(A)-(B) Increase in Working Capital 1,186,084 88,903 1,274,987 1,256,753 924,537 44,936 969,473 1,071,777 184,976 184,976 261,547 43,967 801,574 1,170,531 155,300 71,601 332,734 2,531,740 627,152 920,130 227,670 37,857 228,441 2,041,250 174,422 250,401 33,744 104,293 72,370 2011 2010 (Rs. in thousands) Increase Decrease
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A STUDY ON CASH FLOW AND FUND FLOW Fund from Operations Particulars Closing Balance of Reserves & Surplus Less: Opening Balance of Reserves & Surplus
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Amount 1,491,171 1,152,504 338,667
Add: Depreciation charged for all Assets Total
443,777 782,444
Fund Flow Statement Sources Sale of Fixed Assets 7,546 Working capital Loans Interest Received 3,535 323,033 Repayment of Long-Term Borrowings Repayment of InterCorporate Deposits Proceeds from borrowings Proceeds from buyers credit Funds from operations Dividend paid Dividend Tax paid Deferral sales tax Increase in Working Capital Goodwill consolidation Total 2,149,978 Total 47,036 8,909 3,306 184,976 17,907 2,149,978 782,444 104,603 928,817 Repayment of Public Deposits Repayment of Working Capital Loans Interest paid 267,675 10314 567,046 Amount Applications Purchase of Fixed Assets Amount 1,042,809
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A STUDY ON CASH FLOW AND FUND FLOW ANALYSIS AND INTEPRETATION
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Table 8.2: Table showing Growth in Working Capital.
2006-07 711,219
2007-08 765,127
2008-09 1,143,887
2009-10 1,071,777
2010-11 1,256,753
Graph 8.1: Graph showing Growth in Working Capital Growth in working capital
1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2006-07 2007-08 2008-09 2009-10 2010-11 Growth in working capital
ANALYSIS
From the above chart, we can see that the Working Capital has been fluctuating from year to year. From 2007-08 to 2008-09, increased by 49.5% and from 2009-09 to 2009-10, it has been decreased by 6.3% and again increased in the year 2010-11.
INTERPRETATIONS
The fluctuation in the working capital is due to payment delay by the Debtors and the fluctuations in the customers orders. It can be suggested that the Operating cycle period
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has to be reduced, so that the fluctuations can bring down slightly and also it reduces interest amount which has to be paid for the Loan for Working Capital.
Table 8.3: Table showing Fund from Operations.
2006-07 262,396
2007-08 335,530
2008-09 1,490,494
2009-10 8,83,790
2010-11 782,444
Graph 8.2: Graph showing Fund from Operations Funds from Operations
1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2006-07 2007-08 2008-09 2009-10 2010-11 funds from operations
ANALYSIS
The Fund from Operations in the year 2008-09, it was 1,490,494 and in the year 2009-10, it was 8,83,790. This shows that there is a decrease in fund from operations by 40.7%. There is further decrease in the year 2010-11.
INTERPRETATIONS
The reasons for the downward trend in the Funds from Operations, is due to the decrease in the Inventory and Cash & Bank Balances DSCE-DOMS Page 54
A STUDY ON CASH FLOW AND FUND FLOW Table 8.4: Table showing Cash Flow Statement. Particulars A. Cash flow from Operating activities Profit before Taxation Adjustments for: Depreciation Interest Expense Interest Income (Profit)/Loss on sale of Fixed Assets Bad Debts/Advances Written off Provision for bad and doubtful Debts/Advances Impairment of Goodwill arising on Consolidation Liability no longer required written back Unrealized foreign exchange(gain)loss Amortization of Foreign Currency Monetary Item Provision for warranty Operating cash flow before W/C changes Adjustments for changes in working capital: (Increase)/Decrease in Sundry Debtors (Increase)/Decrease in Other Receivables (Increase)/Decrease in Inventories (Increase)/Decrease in Trade and Other Payables (Increase)/Decrease in provisions Adjustment for Unrealized Foreign Exchange Gain/(Loss) Exchange difference on translation of subsidiaries Cash generated from operating activities Income Tax paid Net Cash from Operating activities (13,587) 554,136 (49,666) 504,470 (255,815) (129,506) (174,424) 251,943 8,774 250,433 274,566 (3,535) 4 19,379 (13,965) 13,587 7,883 866,751 303,284 31st march 2011
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31st march 2010
1,58,345
2,25,390 2,49,225 (3,490) 1,272 1,223 7,764 (996) (16,795) 36,463 6,58,401
36,404 (6,603) 6,311 72,375 (1,017)
16,794 (30,197) 7,52,468 (39,291) 713,177
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A STUDY ON CASH FLOW AND FUND FLOW B. Cash Flow from Investing activities Purchase of fixed assets Proceeds from Sale of fixed assets Proceeds from repayment of Loans/ICDs Interest Received Acquisition of Business Division Goodwill on consolidation Net cash used in Investing activities C. Cash Flow from Financing activities Proceeds from borrowings Repayment of borrowings Proceeds from Issue of shares Repayment of Inter Corporate Deposits (Net) Repayment of Public Deposits (Net) Proceeds from Cash Credits/Working Capital Loans (Net) Proceeds from Buyers Credit(Net) Interest Paid Dividend Paid Dividend Tax Paid Net Cash used in financing activities Net Increase/(Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents as at 31.03.2010 Cash and Cash Equivalents as at 31.03.2011 Total (72,370) 227,670 155,300 (72,370) 323,033 104,603 (267,675) (47,036) (8,909) 472,795 928,817 (567,046) 10,314 (1,042,809) 7,546 3,535 (17,907) (1,049,635)
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(2,20,416) 3,562 (39) 20,580 (1,96,313)
1,73,848 (3,18,751) 12,345
(28,580) (74,800) (2,47,652) (45,473) (7,822) (5,36,885)
(20,021) 2,47,691 2,27,670 (20,021)
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A STUDY ON CASH FLOW AND FUND FLOW ANALYSIS AND INTEREPRETATIONS
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Table 8.5: Table showing Profit before Taxation.
2006-07 252,293
2007-08 330,240
2008-09 38,834
2009-10 158,345
2010-11 303,284
Graph 8.3: Graph showing Profit before Taxation
Profit before tax(in 000's)

350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2006-07 2007-08 2008-09 2009-10 2010-11 Profit before tax
ANALYSIS From the above table and chart, we can say that there is a high fluctuations in the profit to the firm. In the year 2008-09, it was decreased by 88.24% and in the year2009-2010 and 2010-11, there was a drastic increase in the profit.
INTERPRETATION Even though there is a profit which is fluctuating, it is not healthy to the organisations. The fluctuating figures are due to rise in the production cost and lower level of customer orders.
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A STUDY ON CASH FLOW AND FUND FLOW Table 8.6: Table showing Net Cash from Operating Activities. 2006-07 305,416 2007-08 372,520 2008-09 (1,34,970) 2009-10 713,177
DTL
2010-11 504,470
Graph 8.4: Graph showing Net Cash from Operating Activities.
Cash from Operating activities(in 000's)

800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 -100,000 -200,000 2006-07 2007-08 2008-09 2009-10 2010-11 Cash from Operating activities
ANALYSIS From the above chart, it is clear that the net cash from operating activities are highly fluctuating. In the year 2009-10 it is showing the high net cash. In the year 2008-09, it is showing negative figures. Again in the year 2010-11, the cash flow has been drastically decreased.
INTERPRETATION The fluctuating are the results of fluctuations in the inventory level, debtors, other receivables and payables.
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A STUDY ON CASH FLOW AND FUND FLOW Table 8.7: Table showing Cash Flow from Investing Activities.
DTL
2006-07 (440,949)
2007-08 (803,655)
2008-09 (1,271,874)
2009-10 (196,313)
2010-11 (1,049,635)
Graph 8.5: Graph showing Cash Flow from Investing Activities.
Cash from Investing activities(in 000's)

0 2006-07 2007-08 2008-09 2009-10 2010-11 -200,000 -400,000 -600,000 -800,000 -1,000,000 -1,200,000 -1,400,000 Cash from Investing activities
ANALYSIS From the above chart, it is clear that there is negative cash flows in all the years due to the investing activities of the company.
INTERPRETATION The increasing and decreasing negative cash flows is due to the increasing and decreasing investments in purchase of fixed assets from the company. In the year 2008-09 there is a huge investment in fixed assets.
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A STUDY ON CASH FLOW AND FUND FLOW Table 8.8: Table showing Cash Flow from Financing Activities.
DTL
2006-07 128,792
2007-08 658,414
2008-09 1,374,722
2009-10 (536,885)
2010-11 472,795
Graph 8.6: Graph showing Cash Flow from Financing Activities
Cash from Financing activities(in 000's)

1,500,000 1,000,000 500,000 Cash from Financing activities 0 2006-07 2007-08 2008-09 2009-10 2010-11 -500,000 -1,000,000
ANALYSIS From the above chart, it is clear that in the year 2009-10, the cash flow from financing activities is showing a negative sign. But in all the other years that is 2006-07, 2007-08, 2008-09, and 2010-11, there is a positive cash flows.
INTERPRETATION The main reason for negative figures is due to repayment of loans (long-term borrowings and working capital loans) and increase in the payment of interest, dividend and dividend tax. The positive cash flow is due to the borrowings and loans.
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DTL
Table 8.9: Relationship between Share Price and Performance Indicators: Correlation and Anova Results.
Dependent Variable
Independent Variable
Relationship
Correlation Coefficient R
Regression Coefficient R
2
F Value
Sig. F Value
Share price Share price Share price Share price
Working capital Net Sales Profit after tax Fund from operations
+ + +
0.961 0.950 -0.399 0.748
0.924 0.903 0.159 0.559
36.323 27.929 0.566 3.800
0.009 0.013 0.506 0.146
Share price
Cash flow from operating activities
0.161
0.026
0.080
0.796
Share price
Cash from Investing activities
-0.288
0.83
0.271
0.638
Share price
Cash from financing activities
0.017
0.000
0.001
0.978
ANALYSIS The above table shows the correlation between share price of the company for 2006-07 to 2010-11 with the performance indicators such as working capital, net sales, funds from operations, cash flow from operating activities and etc.
INTERPRETATION The above analysis shows that there is a significant influence of working capital and net sales on the share price of the company with the significant levels 0.009 and 0.013 respectively. It also shows that there is no significant influence of different cash flows with the share price of the company.
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DTL
Table 8.10: Relationship between Net sales and Other Indicators: Correlation and Anova Results.
Dependent Variable Independent Variable Relationship Correlation Coefficient R Net Sales Profit after Tax Net Sales Working capital Net Sales Fund from operations Net Sales Cash flow from operating activities Net Sales Cash from Investing activities Net Sales Cash from financing activities + 0.053 0.003 0.008 0.933 -0.328 0.107 0.360 0.591 + 0.238 0.056 0.180 0.700 + 0.609 0.371 1.766 0.276 + 0.980 0.960 72.941 0.003 -0.186 Regression Coefficient R
2
F Value
Sig. F Value
0.34
0.107
0.765
ANALYSIS The above table shows the correlation between Net sales of the company for 2006-07 to 2010-11 with the financial indicators such as working capital, profit after tax, funds from operations, cash flow from operating activities and etc.
INTERPRETATION The above analysis shows that there is a significant influence of working capital on the net sales of the company with the significant levels 0.003. It also shows that there is no significant influence of different cash flows, funds from operations, profit after tax and etc with the Net sales of the company.
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A STUDY ON CASH FLOW AND FUND FLOW Table 8.11: Table showing Trend Analysis.
DTL
Particulars Net Sales
2006-07 2,402,889 100%
2007-08 3,559,606 148.13% 3,30,240 130.89% 7,65,127 107.57% 3,35,530 127.87% 3,72,520 121.97%
2008-09 3,976,145 165.47% 38,834 -649.67% 11,43,887 160.83% 14,90,494 568.09% -1,34,970 -226.28%
2009-10 4,252,693 176.98% 1,58,345 -62.76% 10,71,777 150.69% 8,83,790 336.85% 7,13,177 233.51%
2010-11 4,512,815 187.81% 3,03,284 120.21% 12,56,753 176.70% 7,82,444 298.192% 5,04,470 165.18%
Profit before Tax Working Capital Funds from operations Cash from Operating Activities Cash from Investing Activities Cash from Financing Activities
2,52,293 100% 7,11,219 100% 2,62,396 100% 3,05,416 100%
-440,949 100%
-8,03,655 182.25%
-1,271,875 288.44%
-1,96,313 -44.52%
-1,049,635 238.04%
1,28,792 100%
6,58,414 511.22%
13,74,722 1067.39%
-5,36,885 -416.86%
4,72,795 367.09%
ANALYSIS The above table shows the trend analysis of the different performance indicators of Dynamatic Technologies Limited from the year 2006-07 to 2010-11. The base year considered is 2006-07 and the trend for five years is calculated.
INTERPRETATION The above analysis shows that there is increasing and decreasing trend of all the indicators over five years. Net sales and Working capital is increasing year by year where as other indicators have a fluctuating trend. DSCE-DOMS Page 63
DTL
CHAPTER 9 FINDINGS OF THE STUDY

Fund Flow Analysis The total funds is being collected by disposing of fixed assets, issuing shares or debentures, long-term or short-term loans and from normal operational activities of the concern. Specific utilization of funds i.e., how much has been applied for acquiring fixed assets, how much for repayment of long-term or short-term loans as well as for payment of tax and dividend etc. Inventories are showing the upward trend and have been raised by 32.9% from 2008 to 2010. Fund from Operations has been decreased from Rs.8, 83,790 to Rs.782, 444 by 40.7%. In the fund flow statement, sources have been decreased drastically. There is no influence of funds from operations on net sales or share price of the company. The working capital of the company is being increased in 2010-11 which is good sign of liquidity.
Cash flow Analysis The firm is in a position to meet its obligations such as payment of creditors, repayment of bank loan, payment of interest, secured term loans, etc. The Net Cash from operating activities have been decreased from Rs.713, 177 to Rs.504, 470 from the year 2009-10 to 2010-11. The cash from investing activities has been increased in negative terms. The cash flow from financing activities has been recovered from negative balance Rs.536885 in the year 2009-10 to Rs. 472,795 in 2010-11. It is also found that there is no influence of net sales on the cash inflows and outflows.
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A STUDY ON CASH FLOW AND FUND FLOW SUGGESTIONS
DTL
The inventories are showing the upward trend, it has to be put to operating activities in the right time. So that the inventory cost can be reduced. Working Capital has to be increased by reducing the current liabilities and provisions. Fund from Operations has to be increased which strengthens the sources of funds. The firm has to meet its obligations at the same time it has to maintain sufficient funds (working capital) to meet the day-to-day administrations. In turn, it will help to maintain conservative liquidity for the firm.
The irrelevant cost has to be reduced to maximum extent, so that the profit can be increased to some extent. In turn helps in the investing activities, which will increases the cash flow towards the organization.
Company has to take suggestions and feedback from employees, which can be implemented when investment and purchase of assets takes place.
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A STUDY ON CASH FLOW AND FUND FLOW CONCLUSION
DTL
The analysis on cash flow and fund flow with reference to Dynamatic Technologies Limited was made with the objective of finding the relationship between the various cash flows of the company and the funds from operations with the top line and bottom line and the share price of the company.
The trend analysis is made to study the trend of the companys various performance indicators such as net sales, profit before tax, working capital, funds from operations, and cash flows such as cash from operating activities, cash from investing activities, cash from financing activities.
An analysis is also made to study the important sources of funds, namely, the operations, sale of fixed assets, long-term borrowings and issue of new capital. Similarly, important uses of funds were traced to acquisition of fixed assets, payment of dividends, repayment of loans and capital. The whole exercise reveals the areas in which funds are deployed and the source from which they are obtained. The analysis showed that there is a relation between the share price with the working capital and net sales. There is no relation between the cash inflows and cash outflows with the top line of the company.
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A STUDY ON CASH FLOW AND FUND FLOW ANNEXURE Profit and Loss account for the year ended 31st march 2011. Particulars For the year ended 31st March 2011 Income Sale of manufactured products Less: Excise duty Net Sale of manufactured products Income from project execution services Service Income Other Income 4,817,658 304,843 4,512,815 436,558 1,022 86,387 5,036,782 Expenditure Cost of materials consumed Personnel expenses Other operating expenses 2,462,920 966,237 779,342 4,208,499 EBITD Depreciation Interest and finance charges Profit before minority interest and tax Provision for tax - current tax - minimum alternate tax credit - deferred tax charge - fringe benefit tax - Wealth tax Profit after tax and before minority Interest Minority interest DSCE-DOMS 62,591 (6,432) 30,019 343 216,763 828,283 250,433 274,566 303,284
DTL
For the year ended 31st March 2010
4,482,227 229,534 4,252,693 142,379 3.825 52,692 4,451,589
2,254,731 835,391 728,507 3,818,629 632,960 225,390 249,225 158,345
43,888 (11,928) 21,010 229 105,146
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A STUDY ON CASH FLOW AND FUND FLOW Profit/(loss) for the year Balance brought forward from previous year Amount available for appropriate Dividend: - Interim Dividend - Proposed Dividend - Tax on Dividend Transferred to general reserve Balance carried forward 32,488 21,659 8,909 14,842 356,106 434,004 Earnings per share 40.03 434,004 216,763 217,241
DTL 105,146 170,424
275,570
24,366 16,244 6,901 10,818 217,241 275,570 19.42
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A STUDY ON CASH FLOW AND FUND FLOW Balance Sheet for the year ended 31st march 2011. Particulars SOURCES OF FUNDS Shareholders Fund Share capital Reserves and surplus Loan Funds Secured loans Unsecured loans Deferred tax liability, net 3,091,175 230,641 269,641 5,136,979 APPLICATION OF FUNDS Fixed Assets Gross Block Less: Accumulated depreciation Net Block Capital Work-in-progress Current assets, loans and advances Inventories Sundry debtors Cash and bank balances Other current assets Loans and advances 801,574 1,170,531 155,300 71,601 332,734 2,531,740 Current liabilities and provisions Current liabilities provisions 1,186,084 88,903 1,274,987 Net current assets 1,256,753 5,136,979 DSCE-DOMS 4,594,990 1,573,421 3,021,569 538,526 54,147 1,491,171 31st March 2011
DTL
31st March 2010
54,147 1,152,504
2,407,105 119,232 239,622 3,972,611
3,792,863 1,307,487 2,485,376 105,351
627,152 920,130 227,670 37,857 228,441 2,041,250
924,537 44,936 969,473 1,071,777 3,972,611 Page 69
A STUDY ON CASH FLOW AND FUND FLOW BIBLIOGRAPHY BOOKS: M.Y Khan & P.K Jain FINANCIAL MANAGEMENT, 5th edition 2007, Tata- McGraw-Hill publishing company ltd. Prasanna Chandra FINANCIAL MANAGEMENT, 7th edition 2008, McGraw-Hill-professional series in finance. COMPANYS REPORTS:
DTL
Annual reports of Dynamatic Technologies Limited. (2006 to 2011).
WEBSITES:
http://www.dynamatics.com/ http://www.moneycontrol.com http://www.capitaline.com http://www.dynamatics.com/news.shtml
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A STUDY ON CASH FLOW AND FUND FLOW

CHAPTER 1 1.1 INTRODUCTION

A STUDY ON CASH FLOW AND FUND FLOW

1.2 INDUSTRY PROFILE

A STUDY ON CASH FLOW AND FUND FLOW

measurement, river channel behavior and erosion.

A STUDY ON CASH FLOW AND FUND FLOW

A STUDY ON CASH FLOW AND FUND FLOW

CHAPTER 2 COMPANY PROFILE

2. b. NATURE OF BUSINESS CARRIED

A STUDY ON CASH FLOW AND FUND FLOW

2. c. VISION, MISSION AND QUALITY POLICY

A STUDY ON CASH FLOW AND FUND FLOW 2. d. PRODUCT PROFILE

A STUDY ON CASH FLOW AND FUND FLOW

A STUDY ON CASH FLOW AND FUND FLOW DYNAMETAL

A STUDY ON CASH FLOW AND FUND FLOW PRODUCT PROFILE DIAGRAM

Sheet metal components & machined components

Production of Non-Ferrous Casting & Heat Treatment Facilities.

Production of engine and transmission components for automotive applications

A STUDY ON CASH FLOW AND FUND FLOW 2. e. AREA OF OPERATION

Dynamatic Technologies Limited has its operations in India as well as in abroad.

NATIONAL The Company has its branches in the following cities.

New Delhi Ahmedabad Chennai Coimbatore Secunderabad Mumbai Pune Calcutta

A STUDY ON CASH FLOW AND FUND FLOW

President and Group CFO Mr. V. Sunder

Executive Director and COO Mr. N. Rajagopal

CEO and Managing Director Mr. Udayant Malhotra.

A STUDY ON CASH FLOW AND FUND FLOW

A STUDY ON CASH FLOW AND FUND FLOW QUALITY POLICY CARDS

Efficient collaboration for customer satisfaction 2003.

PURCHASE ORDER/JOB ORDER

A STUDY ON CASH FLOW AND FUND FLOW

CHAPTER 3 MCKENSYS 7S FRAME WORK

A STUDY ON CASH FLOW AND FUND FLOW 3.1 STRATEGY

1) Sort (Seiri) 2) Set in Order (Seiton) 3) Shine (Seiso) 4) Standardize(Seiketsu) 5) Sustain(Shitsuke)

Some of the other strategies with reference to DTL

A STUDY ON CASH FLOW AND FUND FLOW

A STUDY ON CASH FLOW AND FUND FLOW 3.2 STRUCTURE

CEO & Managing Director

President & Group CFO

Executive Director & COO, Hydraulics & Dynametal.

Executive Director & COO, Automotive.

Vice President & COO, Aerospace.

Personal & administration

Human resource department

A STUDY ON CASH FLOW AND FUND FLOW Production Department

A STUDY ON CASH FLOW AND FUND FLOW Steps in the system

A STUDY ON CASH FLOW AND FUND FLOW

Upward Communication Participative forum. Meeting with union & associations.

A STUDY ON CASH FLOW AND FUND FLOW

The total number of staff in the company is 468, in which

No. of persons 20 120

A STUDY ON CASH FLOW AND FUND FLOW

3.7 SHARED VALUE

A STUDY ON CASH FLOW AND FUND FLOW

CHAPTER 4 SWOT ANALYSIS

SWOT Analysis of Dynamatic Technologies Limited

Cost-push inflation, in terms of spiraling aluminum price increases, is a cause of concern.

A STUDY ON CASH FLOW AND FUND FLOW

CHAPTER 5 ANALYSIS OF FINANCIAL STATEMENTS

24,366 16,244 6,901 10,818 217,241 275,570 19.42

Graph 5.1: Graph showing Net Sales. Net Sales

Net Profit Margin