cash flow analysis

INTRODUCTION TO TOPIC

I.1 INTRODUCTION

Cash flow analysis is the study of the business cash inflows and outflows, with the

purpose of maintaining an adequate cash flow for the business, and to provide the basis

for cash flow management. Cash flow analysis involves examining the components of the

business that affect cash flow, such as accounts receivable, inventory, accounts payable,

and credit terms.

By performing a cash flow analysis on these separate components, you'll be able to more

easily identify cash flow problems and find ways to improve your cash flow. Cash-flow

in financial analysis means net income or profit obtained after adding back expense items

which currently do not use cash such as depreciation.

It may also exclude revenue items, which do not currently provide funds. It comes in two

varieties — gross and net. Depreciation is not a tangible expense which is paid for by

drawing a cheque but is a sum set aside each year, whether there is profit or not, for the

replacement of an asset when it is worn-out. Such sums of money can be used to buy new

plant or they can be kept in a bank, invested in gilt-edged securities or used in any way

that the directors may choose. They, in fact form part of the “cash-flow” which is the

amount retained in the business after paying off all expenses including taxes and

dividends.

Gross cash-flow is the net profit after tax plus the provision for depreciation. Net cash-

flow is obtained from the gross figure by deducting the amount distributed as dividend on

preference and ordinary shares. Of the two, net cash-flow is the more important and

commonly used because it represents the actual amount of cash retained in the business

after all outgoings including dividends.

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Definition

“The difference between the available cash at the beginning of an accounting period and

that at the end of the period”. Cash comes in from sales, loan proceeds, investments and

the sale of assets and goes out to pay for operating and direct expenses, principal debt

service, and the purchase of asset.

I.2 OBJECTIVES OF THE STUDY :

To analyze cash flow statements of Sivashakthi Bio-Planttec limited from 2003 to

2008.

To know the cash flow in operating, investing and financing activities.

To asses the ability of the enterprise to generate and use cash and cash

equivalents.

To examine the relationship between profitability and net cash flow and the

impact of changing prices.

To suggest the company for improving short term and long term financial

positions.

I.3. IMPORTANCE OF THE STUDY:

A cash flow statement is an important financial tool for management in efficient, short-

term financial planning. It enables the management to plan and co-ordinate the operation

of the concern, and furnishes the basis for evaluating the financing polices.

It helps the management in making the financing problems of the business much more

manageable. The following are the uses of the cash flow analysis.

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Helpful in efficient cash management :

It is very helpful in understanding the cash position of the firm. Since cash is basis

for carrying on business operations, the cash flow statements is very useful in

evaluating the current cash position.

Planning of programmers :-

The repayment of loans, replacement of assets and other such programmers can

be planned on its basis.

Helpful in short term financial decisions :

The cash flow statement is helpful in making short-term financial decisions

relating to liquidity, and the ways and means position of the firm.

Useful in capital budgeting :

Cash flow statement is also useful for making appraisal of different capital

investment projects in order to determine their viability and profitability.

Useful as a control device :

It helps the management to understand the past behavior of the cash cycle, and to

control the uses of cash in future. A comparison of the projected cash flow

statements helps the management in appraising the inflows and outflows of cash

according to the plan and taking the necessary remedial measures.

Useful to outsiders :

Cash flow statement is also very useful to external analysts like bankers, creditors

etc., for assessing the short-term solvency of a business concern as well as its

capacity to meet its short-term obligations.

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I.4. NEED FOR THE STUDY

A cash flow statement is the motor oil for any business finance engine. It measures the

amounts of money that come into a company and out of it over a given time period. This

way a company is able to keep track of how much cash it has on hand to pay expenses

and buy assets.

Some people might confuse a cash flow statement with an income statement. An income

statement only measures whether or not the company made a profit, whereas a cash flow

statement can tell you whether or not the company generated c ash during the time

period. These concepts may seem a bit confusing. Just because a company has generated

cash does mean that it has generated profit and vice versa. Cash flow statements work

particularly with cash where as income statement s may also deal with assets.

Cash flow statements use information from both income statements and balance sheets.

Using this information, the cash flow statement will reveal the net increase or decrease in

cash for the period.

I.5. SCOPE OF THE STUDY:

An entity is required to prepare a cash flow analysis in accordance with the requirement

of the standard and to present it as an integral part of its financial statement for each

period for which financial statement are presented. The users of financial statement are

interested in how an entity generated and uses cash and cash equivalents

I.6. RESEARCH METHODOLOGY

Data sources:

1. Primary data:

The data is collected by holding discussions and interviews with the relevant

persons of the company. i.e. Accounting manager of financial department

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2. Secondary data:

The data and information required for the present study is mainly acquired from

the annual reports of Sivashakthi Bio-Planttec limited. For the period 2003-2008,

information was also extracted from internet.

I.7. LIMITATIONS OF THE STUDY:

Every study will have its own limitations. The present study is also carried out

with the following limitations.

The data source is mainly based on annual reports only.

Non-Cash Transactions are ignored in cash flow analysis

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COMPANY PROFILE

II.1.An Overview of Sivashakthi Bio-Planttech Ltd.

Sivashakthi Bio Planttech Ltd. is founded by Sri G V Anjeneylu in the year 1996.The

company started its business initially in Vijayawada on a small note, producing and

selling genetically superior high quality Teak plants. Over the years the company has

added new products like Horticulture plants and hygrow Organic Manures. The

horticulture hybrid varieties include Mango, Sapota, Amla and Pomegranate and the

organic manure is marketed with a brand name "Vijaya Growmin". The company is

proud to have introduced high density planting, which is a modern farming method in the

country thereby helping the farmers to reap the yield three times more compared to the

conventional methods of farming.

The company has been showing excellent results year after year, developing a wide

customer base throughout the country. The company has created a niche for itself in the

market with its high quality products and customer service. The company provides

technical guidance and after sales service to its customers through qualified and dedicated

agriculture officers for better yields.

Adopting a policy of one-to-one relationship with the farming community, the company

has been selling its products to farmers directly through its own marketing network.

Today it boasts of spreading its operations to 14 states in the country having 116branch

offices.

The strength of manpower has increased from 15 to 4,500 and the sales turnover has gone

up from 15 lakhs to 66 crores. Now the company is set to cross a major milestone of Rs.

114 crore turnovers in the current year. Buoyed with the tremendous response and

encouragement it received from the farming community, the company has embarked on a

massive expansion plan to increase its production capacities. It has established 4 new

production units recently at Mandya (Karnataka), Pune (Maharastra), Balarampur and

Gajaroula (U.P) and commenced Organic fertilizer production. One other new unit at

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Gokak, Karnataka is on anvil. The company's future plans include introduction of plant

growth promoters, wetting agents, soluble fertilizers, foliar fertilizers and micro nutrients

into the market shortly. It also has plans to export organic manures and introduce

innovative home appliances.

II.2. History of the organization

Sivashakthi Bioplanttec Ltd was established in the year 1996. The focus of their

company has been the economic growth of the Farming community of the Country,

as agriculture is the backbone of their economy.

Sivashakthi has revolutionized the way modern farming is carried out with its production

and marketing of Genetically superior and high yielding Teak and Horticulture plants like

Mango, Sapota, Amla etc

II.3.BUSINESS OVERVIEW

Sivashakthi Bio Planttec Limited was incorporated on 12 th January 1996 with the main

objective of Production and marketing of high quality of teak wood saplings. Later on it

started production of Horticulture plants and recently it has started the manufacturing and

marketing of cercal protein Hydrolyses based Plant Growth Promoters. The company has

mainly 3 production categories viz., Teak Saplings, Horticulture saplings and Plant

Growth Promoters. The Individual production capacities of these products are as under.

1. Teak Saplings - 25 Lakhs /annual

2. Horticulture Saplings

- Mango - 5 Lakhs/Annual

- Amla - 5 Lakhs/Annual

- Sapota - 5 Lakhs/Annual

- Pomegranate - 2.5 Lakhs/Annua

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3. CPH based Plant Growth Promoters

- Liquid Form - 10 Lakhs Kl/annual

- Granule Form - 100 MT/Annual

Since Production of planting materials like Teak & Horticulture plants is as unorganized

sector, presently there are no rules/regulations or any registering authority. As such there

are no restrictions to carry on production & marketing of the above planting materials

The Company started its operation in 1998, during 1998 only one branch at Vijayawada

with 6 employees.

Till recently up to October 2005 the company production the teak sapling by processing

stumps from various sources like forestry, private nurseries, farmers due to which there

were variations in the final products. Since lot of grading have to been done to obtain un-

form product cost production comparatively higher.

Later company thought its R & D Department in collaboration with leading scientists in

this field conducted an elaborate survey and successfully identify certain areas in

different parts of the country to obtain seed material. These seeds are collected from best

growing and early maturing plus trees. The Plus trees are mother tree have the following

characters.

They have straight main stump

These trees grows straightly

Have high degree of resist to pests and dieses

They have known to yield superior quality timber

Sivashakthi teak saplings are now produced from the seeds of such plus trees or mother

trees. Sivashakthi as selected mother orchards in states of Maharashtra, Andhra Pradesh,

Karnataka, Madhya Pradesh, Uttar Pradesh

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Here the Plus trees are selected and the seeds from such trees are collected from for

further production using modern propagation and green house technology.

The Company has 4 Production Centers at Sangaluru, Lucknow, Indore, Bhubaneswar

exclusively to produce stumps through the seeds collected from mother orchards. Here

the main purpose is to select best growing and uniform plants. This is achieved through

separation of slow growing and un uniform plants of different stages right after seed

germination till stumps formation stage. Overall there will be 2 to 3 grading to achieve

uniform quality stumps. These Stumps are transfer to secondary production centre for

further raising of seedlings in poly bags.

Presently The Company having 11 production centers to raise the saplings from stumps.

Here the main objective is again to select the best quality seedlings the respect uniform

growth and vigor of the seedlings.

II.4. PRODUCTION PROCESS

FOR TEAK SEEDING:

The process involved in production of high quality Teak seedlings can be described as

follows:

1) In the first step, areas where there is a presence of predominately high number of

fast growing, high Vigo red, high quality timber yielding Teak trees are identified

in the natural forest areas across the country like western Gnats go Karnataka,

Karalla, Maharashtra ,Eastern parts of Andhra Pradesh , Madhya Pradesh,

Jharkhand, Uttar Pradesh and Bihar. The areas are earmarked as mother orchards.

2) From these Mother Orchards specific trees are identified with known characters

such as faster rate of growth, high degree of resistance to pests and diseases and

which yield high quality timber. These trees are earmarked as “Plus Trees” or

Mother Trees.

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3) During February-March which is a season for collection of the seeds, the seeds

from these plus trees are collected from different Mother Orchards.

4) Seeds treatment is given to break the Dormancy of the seeds by coating the seeds

with cow-dung slurry and subjecting them to alternate wetting and drying cycles.

5) These treated seeds are dried under shade and sown on raised feds containing

proper mixture of top soil, compost & sand to facilitate better germination. This is

done in the month of April-May.

6) Germination takes place with in 30-40 days. The germination % rises between 60-

80% depending upon nursery management practices & the seed quality. Here

those seeding which germinate early having good vigor and retained and slowly

germinating with low vigor and descended.

7) Preparation of stumps

Seeding which 12-15 months old with colon die motor of about 2.5to 4cm are

used for preparation of stumps for preparation of stumps the seeding is be headed

1cm above the color and routs are tremended further these stumps are transported

to secondary production centre.

8) Planting of stumps:

The stumps received from primary production centre are painted in poly Bags

under plastic tunnels to facilitate faster growth.

9) Proper care is taken by spraying pesticides & fungicides to see that the plants

remain healthy.

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10) Here again grading is done by selecting the fast growing vigorous and healthy

plants and rejecting the slow growing low Vigo red and unhealthy disease

affected plants.

11) Only the best quality healthy and vigorous plants are dispatched once they attain

6-8 leaf stage with 1-1 1/2ft height.

Special features of Sivashakthi’s Teak Seeding

Sivashakthi’s Teak plants have the following special characters.

1) Plants grow straight in a balanced proportion

2) The main step develops into a very strong trunk with less no of side branches

3) They have got comparatively high degree of resistance to pests & diseases than

ordinary teak plants.

4) They yield attractive wood with good color & high quality

Sivashakthi’s special package to the customers:

1) Company provides these plants at the door steps of the customers with absolutely

no additional transport cost

2) Free technical service is provided to the customers through a team of well

qualified agricultural officers once in 6 months

3) As a gesture of good will and to field a long lasting with the customers,

sivasakthi provides one-time free replacements for the dead plants even to the

extent of 100%

4) Replacement plants are also delivered to the door steps of the customers totally

free of cost

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5) Service on call: - Whenever the customers require company’s technical

assistance they can call their branch officers and they shall be attended by their

technical experts over phone

VALUES

1) QUALITY:

Sivashakthi commit them selves to constantly improve them selves, their products and

services so as to become the best.

2) LEADERSHIP:

They commit to set highest standards in their business.

3) POSITIVE ATTITUDE:

They believe that remaining positive and looking ahead is essential to achieve goals.

4) WORK ENVIRONMENT:

They build a motivating work place where people can realize their professional

ambitions.

5) SOCIETY:

They want to contribute to society through economic contributions, positive benefits of

their customers.

6) ISO 9001-2000 CERTIFICATION

They commit them selves to get all their products certified as per ISO Standards

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II.5.A PROFILE OF SIVA SHAKTHI BIO PLANTTEC LIMITED

Opening the Door to new possibilities:

As natural resources and utilities transform economics, Indian agriculture will play an

increasingly vital role in connecting the farming community and the technology

necessary for growth.SIVASHAKTHI operates at the very center of this vast change,

and as a catalyst for progress, fosters entrepreneurship, innovation, efficiency and

economic reform. To succeed, they must remain nimble and ready to combine capital

with strategic advice to play a constructive role for their clients.

In any business environment, however, certain tenets of their firm remain absolute. A

dedication to their customers, a determination to attract and develop talent with

unsurpassed expertise and a commitment to their culture of excellence team work and

integrity.SIVASHAKTHI with this as focus, they believe they will be well positioned

not only to respond change but to anticipate it in ways that best serve their clients for

value addition, to their shareholders for enhancing their funds and to society at for a

growth.

MISSION:

To achieve their objectives in an environment of fairness, honesty and courtesy

towards their customers, employees, vendors and society at large. Guided by this

inspiring credo, they hope to reach many more milestones in endeavors for the quality

of human life and the environment

VISION:

Sivashakthi is a market leader excelling in business, delighting the customers with

superior quality products and services with a team of highly competent, committed

professionals, respected for ethical business practices and proud of contributing to

economic growth of India.

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FIVE CORE VALUES:

SIVASHAKTHI has always sought to be a value driven organization. These values

continue to direct the company’s growth and prosperity. The five core values

underpinning the way they do their business are:

1) Integrity:

Sivashakthi conduct their business fairly, with honesty and transparency. Everything

they do must stand the best of public scrutiny.

2) Understanding:

Sivashakthi caring, show respect, compassion and humanity for their colleagues and

customers and always work for the benefit of the communities they serve.

3) Excellence:

They constantly strive to achieve the highest possible standards in their day-to-day

work and in the quality of goods and services they provide.

4) Unity:

They work cohesively with their colleagues and customers in building strong

relationship based on tolerance, understanding and mutual cooperation.

5) Responsibility:

They continue to be responsible, sensitive to the communities and environments in

which they work, always ensuring that what comes from the people goes back to the

people many times over.

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PURPOSE:

At SIVASHAKTHI, their purpose is to improve the quality of life of the communities

they serve. They do this through leadership in sector of national economic significance,

to which the company brings a unique set of capabilities. This requires them to grow

aggressively in their focused area of business. Their heritage of returning to society what

they earn evokes trust among consumers, employees, shareholders and the community.

This heritage is being continuously enriched by formalization of high standards of

behavior expected from employees. SIVASHAKTHI name is a unique asset

representing leadership with trust. Leveraging this asset to enhance their competitiveness

is the route to sustained growth and long-term success.

CULTURE:

Their culture is difficult to describe in words, let alone a paragraph. It is lived. It did not

appear overnight, but it is a product of their history. Its hallmarks-excellence, teamwork

and integrity –are grounded in strong business judgment and accountability. They

believe that talent and motivation can be exponentially more powerful in an environment

of mutual respect, trust and collaboration.

THEIR FUTURE:

In the course of SIVASHAKTHI’S history, the firm has developed FOUR underlying

strengths that serve them well today and will, they trust, do so in future, THEIR

excellent relationship with the farming community, that they believe they are second to

none, THEIR best research and development wing and management capabilities and

THEIR culture that allows them to attract, develop, motivate and retain exceptional and

encourages them to work together in a real spirit of team work.

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Looking ahead they see favorable conditions buoyed by economic growth and they

believe they are well suited to participate in the growth. They are committed to

providing their shareholders with return of equity at or near the top of their industry

while continuing their successful record of near the top of their industry while

continuing their successful record of growing book value and earning per share.

FOCUS:

To achieve a minimum turnover of Rs. 5 billion by the year 2009

To concentrate on high value & low volume fertilizers.

To establish a minimum of 10 production units in every state of India.

To increase the current market share and remain as market leader.

To explore business opportunities in overseas markets.

To increase the product base from 10 to 25 by 2008.

To diversify into Bio Technology and Bio Medicines.

THEIR APPROACH TO GROWTH

INNOVATION & CREATIVITY:

They have reinvented themselves many times in the services they provide to their

customers and it is that reinvention and creativity that keeps them alive. Customers tell

them that the quality of their teamwork across their products and after sale services

makes real differences to them. As a result, when markets expand and customers grow,

they tend to grow with them.

TALENTED MANPOWER

They belive that their strategy for continuous growth is best executed by giving talented

people the resources they need to build new and existing business. They have found that

high-quality talent is the most important driver of growth over time. They have

demonstrated that over the long tem, their approach can outperform the competition,

creating value for their shareholders and career opportunities for their people.

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RESEARCH AND DEVELOPMENT

The heart of SIVASHAKTHI’S research and development is their product pipeline.

Their pipeline is an engine for discovering and developing the next generation of

commercial products. During the previous year the company invested substantial

amounts in researching new solutions for growers. The company concentrates the vast

majority of its Research-and –Development (R&D) efforts on new biotech traits, elite

germplasm, breeding, new variety and hybrid development and genomic research. Other

R&D projects support the company’s current products.

ALL INNER COMPANIES

Sivashakthi Bio Partech Ltd.( SSBPL)

V N Fertichem Limited(VNFL)

Victor Fertilizers Limited(VFL)

Victor Agri Industries Limited (VAIL)

Victor Agri Agencies Private Limited(VAAPL)

Victor Technologies Limited(VAL)

Nava-Barat Fertilizers Limited(NBFL)

Victor Homes Limited(VHL)

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II.7. ORGANIZATION CHART

Illustration II.1

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CHIEF MENTOR

MANAGING DIRECTOR CHAIR PERSON

VICE PRESIDENT

1.

SENIOR GENERAL MANAGER

2.

SENIOR MANAGR HUMAN RESOURE

3.

SENIOR MANAGER ACCOUNTS

4.

SENIOR MANAGER

INFORMATI ON TECHNOLOGY

5.

SENIOR MANAGERTAXATION

6.

SENIOR MANAGER INTERNAL AUDIT

1.DEPUTY GENERAL MANAGERFINANCE AND ACCOUNTS

2.DEPUTYGENERAL MANAGER RESEARCH AND DEVELOPMENT

3.DEPUTY GENERAL MANAGERPRODUCTION

4.DEPUTY GENERAL MANAGER ADMINISTRATION

REVIEW OF LITERATURE

III.1.INTRODUCTION TO CASH FLOW STATEMENTS Cash flow is essentially the movement of money into and out of your business; it's the

cycle of cash inflows and cash outflows that determine your business' solvency. Cash

flow analysis is the study of the cycle of your business' cash inflows and outflows, with

the purpose of maintaining an adequate cash flow for your business, and to provide the

basis for cash flow management.

Cash flow analysis involves examining the components of your business that affect cash

flow, such as accounts receivable, inventory, accounts payable, and credit terms. By

performing a cash flow analysis on these separate components, you'll be able to more

easily identify cash flow problems and find ways to improve your cash flow.

Cash-flow in financial analysis means net income or profit obtained after adding back

expense items which currently do not use cash such as depreciation. It may also exclude

revenue items, which do not currently provide funds. It comes in two varieties — gross

and net.

Depreciation is not a tangible expense which is paid for by drawing a cheque but is a sum

set aside each year, whether there is profit or not, for the replacement of an asset when it

is worn-out. Such sums of money can be used to buy new plant or they can be kept in a

bank, invested in gilt-edged securities or used in any way that the directors may choose.

They, in fact form part of the “cash-flow” which is the amount retained in the business

after paying off all expenses including taxes and dividends.

Gross cash-flow is the net profit after tax plus the provision for depreciation. Net cash-

flow is obtained from the gross figure by deducting the amount distributed as dividend on

preference and ordinary shares. Of the two, net cash-flow is the more important and

commonly used because it represents the actual amount of cash retained in the business

after all outgoings including dividends.

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It is frequently assumed that there will always be a cash-flow at least equal to the

provision for depreciation or other adjustments not involving cash. This will be true only

if the total revenue (sales and other income) for a period fully covers all of the expenses

including depreciation and other write-offs. If the operations for a period result in a loss

and if the loss exceeds the “non-cash” adjustments, the cash-flow will be negative instead

of being positive.

CONCEPT OF CASH FLOW STATEMENT

Cash Flow Statement

Cash flow statement may provide considerable information about what is really

happening in a business beyond that contained in either the income statement or the

balance sheet. Analyzing this statement should not present an intimidating task; instead it

will quickly become obvious that the benefits of understanding the sources and uses of a

company’s cash far outweigh the costs of undertaking some very straightforward

analyses.

Format of the Cash Flow Statement

• The cash flow statement is divided into three sections:

Cash flow from operating activities : shows the results of cash inflows and

outflows related to the fundamental operations of the basic line or lines of

business in which the company engages. (Example: cash receipts from the sale of

goods or services and cash outflows for purchasing inventory and paying rent and

taxes.)

Cash flow from investing activities : associated with purchases and sales of non-

current assets (Example: building and equipment purchases or sales of

investments or subsidiaries.)

Cash flow from financing activities : associated with financing the firm (Example:

selling and paying off bonds and issuing stock and paying dividends)

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Exceptions:

Short-term marketable securities are treated as long-term investments and appear

in cash flow from investing activities

Short-term debt is treated as long-term debt and appears in cash flow from

financing activities

Although dividends are handled as a cash outflow in the cash flow from financing

activities section, interest payments are considered an operating outflow, despite

the fact that both are payments to outsiders for using their money.

BENEFITS OF THE CASH FLOW

Critics point out that the term cash-flow, meaning net profit inclusive of the provision for

depreciation and similar non-cash transactions, is a misnomer since it implies that

because of the write-back of expense items like depreciation which do not currently use

cash, additional cash has flown into the business when nothing of the sort has really

happened. All that has been achieved by adding back to the net profit the provision for

depreciation and other non-cash transactions is to put on a cash basis the annual accounts

originally written on the accrual basis.

The critics, nevertheless, admit that cash-flow is a valid analytical tool which, whe

correctly used, helps explain:

1. How companies are able to finance large-scale expansion or modernization, or

repay heavy borrowings without resorting to fresh equity financing, and

2. Reconcile the difference in the net profit of companies operating within the

same industry and otherwise comparable on the basis of their capitalizations,

product-mix, and over-all management policies.

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The revenue earned by a company from its operations appears on its profit and loss

account for the year as “Sales and Other Income”. After deducting from this the expenses

of the business including depreciation and income tax, there is left a balance commonly

termed the net profit (or loss) for the year.

But, unlike the out of pocket expenses like raw material costs, salaries, wages, etcetera,

depreciation and similar provisions do not represent current outlays of cash. To arrive at

the true spending power generated through operation it is necessary to add back to the net

profit the items which do not constitute either a source or a disposition of cash such as

depreciation which is one of the heaviest “expense” items listed on the profit and loss

account.

III.2. PREPARATION AND PRESENTATION OF CASH FLOW STATEMENT

The presentation of cash flow statement is carried out in two alternative formats that are

either through direct method or indirect method. The difference in these two methods lies

in their presentation of ‘Cash flows from operating activities’. In the direct method,

operating cash receipts and payments are reported directly. In the indirect method, cash

flows from operating activities are reported by way of adjustments of the reporting

period’s net profit reported in the profit and loss account.

Definitions:

The following terms are used in this statement with the meanings specified:

Cash comprises cash on hand and demand deposits with banks.

Cash equivalents are short term, highly liquid investments that are readily

convertible into known amounts of cash and which are subject to an insignificant

risk of changes in value.

Cash flows are inflows and outflows of cash and cash equivalents.

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Operating activities are the principal revenue-producing activities of the

enterprise and other activities that are not investing or financing activities.

Investing activities are the acquisition and disposal of long-term assets and other

investments not included in cash equivalents.

Financing activities are activities that result in changes in the size and

composition of the owner’s capital and borrowings of the enterprise.

Cash and Cash equivalents:

Cash equivalents are held for the purpose of meeting short-term cash commitments rather

than for investment or other purposes. For an investment to qualify as a cash equivalent,

it must be readily convertible to a known amount of cash and be subject to an

insignificant risk of changes in value. Therefore, an investment normally qualifies as a

cash equivalent only when it has a short maturity of, say, three months or less from the

date of acquisition.

Investments in shares are excluded from cash equivalents unless they are, in substance,

cash equivalents; for example, preference shares of a company acquired shortly before

their specified redemption date.

Cash flows exclude movements between items that constitute cash or cash equivalents

because these components are part of the cash management of an enterprise rather than

part of its operating, investing and financing activities. Cash management includes in

investment of excess cash in cash equivalents.

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III.3.PRESENTATION OF A CASH FLOW STATEMENT

The cash flow statement should report cash flows during the period classified by

operating, investing and financing activities.

An enterprise presents its cash flows from operating, investing and financing activities in

a manner which is most appropriate to its business. Classification by activity provides

information that allows users to assess the impact of those activities on the financial

position of the enterprise and the amount of its cash and cash equivalents. This

information may also be used to evaluate the relationships among those activities.

A single transaction may include cash flows that are classified differently. For example,

when the installment paid in respect of a fixed asset acquired on deferred payment basis

includes both interest and loan, the interest element is classified under financing activities

and the loan element is classified under investing activities.

1. Operating Activities

The amount of cash flows arising from operating activities is a key indicator of the

extent to which the operations of the enterprise have generated sufficient cash flows to

maintain the operating capability of the enterprise, pay dividends, repay loans and make

new investments without recourse to external sources of financing. Information about the

specific components of historical operating cash flows is useful, in conjunction with other

Information, in forecasting future operating cash flows.

Cash flows from operating activities are primarily derived from the principal revenue-

producing activities of the enterprise. Therefore, they generally result from the

transactions and other events that enter into the determination of net profit or loss.

Examples of cash flows from operating activities are:

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(a) Cash receipts from the sale of goods and the rendering of services;

(b) Cash receipts from royalties, fees, commissions and other revenue;

(c) Cash payments to suppliers for goods and services;

(d) Cash payments to and on behalf of employees;

(e) Cash receipts and cash payments of an insurance enterprise for premiums and claims,

annuities and other policy benefits;

(f) Cash payments or refunds of income taxes unless they can be specifically identified

with financing and investing activities; and

(g) Cash receipts and payments relating to futures contracts, forward contracts, option

contracts and swap contracts when the contracts are held for dealing or trading purposes.

Some transactions, such as the sale of an item of plant, may give rise to a gain or loss

which is included in the determination of net profit or loss. However, the cash flows

relating to such transactions are cash flows from investing activities

An enterprise may hold securities and loans for dealing or trading purposes, in which

case they are similar to inventory acquired specifically for resale. Therefore, cash flows

arising from the purchase and sale of dealing or trading securities are classified as

operating activities. Similarly, cash advances and loans made by financial enterprises are

usually classified as operating activities since they relate to the main revenue-producing

activity of that enterprise.

2. Investing Activities

The separate disclosure of cash flows arising from investing activities is important

because the cash flows represent the extent to which expenditures have been made for

resources intended to generate future income and cash flows. Examples of cash flows

arising from investing activities are:

(a) Cash payments to acquire fixed assets (including intangibles). These payments

include those relating to capitalized research and development costs and self-constructed

fixed assets;

25

(b) Cash receipts from disposal of fixed assets (including intangibles); Cash Flow

Statements

(c) cash payments to acquire shares, warrants or debt instruments of other enterprises and

interests in joint ventures (other than payments for those instruments considered to be

cash equivalents and those held for dealing or trading purposes);

(d) cash receipts from disposal of shares, warrants or debt instruments of other

enterprises and interests in joint ventures (other than receipts from those instruments

considered to be cash equivalents and those held for dealing or trading purposes);

(e) Cash advances and loans made to third parties (other than advances and loans made

by a financial enterprise);

(f) Cash receipts from the repayment of advances and loans made to third parties (other

than advances and loans of a financial enterprise);

(g) cash payments for futures contracts, forward contracts, option contracts and swap

contracts except when the contracts are held for dealing or trading purposes, or the

payments are classified as financing activities; and

(h) Cash receipts from futures contracts, forward contracts, option contracts and swap

contracts except when the contracts are held for dealing or trading purposes, or the

receipts are classified as financing activities.

When a contract is accounted for as a hedge of an identifiable position, the cash flows of

the contract are classified in the same manner as the cash flows of the position being

hedged.

26

3. Financing Activities

The separate disclosure of cash flows arising from financing activities is important

because it is useful in predicting claims on future cash flows by providers of funds (both

capital and borrowings) to the enterprise.

Examples of cash flows arising from financing activities are:

(a) Cash proceeds from issuing shares or other similar instruments;

(b) Cash proceeds from issuing debentures, loans, notes, bonds, and other short or

long-term borrowings; and

(c) Cash repayments of amounts borrowed.

III.4. REPORTING OF CASH FLOWS

a) Reporting Cash Flows from Operating Activities

An enterprise should report cash flows from operating activities using either:

i. The direct method, whereby major classes of gross cash receipts and gross cash

payments are disclosed; or

ii. The indirect method, whereby net profit or loss is adjusted for the effects of

transactions of a non-cash nature, any deferrals or accruals of past or future

operating cash receipts or payments, and items of income or expense associated

with investing or financing cash flows.

The direct method provides information which may be useful in estimating future cash

flows and which is not available under the indirect method and is, therefore, considered

more appropriate than the indirect method. Under the direct method, information about

major classes of gross cash receipts and gross cash payments may be obtained either:

27

(a) From the accounting records of the enterprise.

(b) By adjusting sales, cost of sales (interest and similar income and interest expense

and similar charges for a financial enterprise) and other items in the statement of

profit and loss for:

i) Changes during the period in inventories and operating receivables and

payables;

ii) Other non-cash items; and

iii) Other items for which the cash effects are investing or financing cash flows.

Under the indirect method, the net cash flow from operating activities is determined by

adjusting net profit or loss for the effects of:

(a) Changes during the period in inventories and operating receivables and payables;

(c) Non-cash items such as depreciation, provisions, deferred taxes and unrealized

foreign exchange gains and losses; and

(d) All other items for which the cash effects are investing or financing cash flows.

Alternatively, the net cash flow from operating activities may be presented under the

indirect method by showing the operating revenues and expenses excluding non-cash

items disclosed in the statement of profit and loss and the changes during the period in

inventories and operating receivables and Payables.

Extraordinary Items

The cash flows associated with extraordinary items should be classified as arising from

operating, investing or financing activities as appropriate and separately disclosed.

The cash flows associated with extraordinary items are disclosed separately as arising

from operating, investing or financing activities in the cash flow statement, to enable

users to understand their nature and effect on the present and future cash flows of the

28

enterprise. These disclosures are in addition to the separate disclosures of the nature and

amount of extraordinary items required by Accounting Standard (AS) 5, Net Profit or

Loss for the Period, Prior Period Items and Changes in Accounting Policies.

Interest and Dividends

Cash flows from interest and dividends received and paid should each be disclosed

separately. Cash flows arising from interest paid and interest and dividends received in

the case of a financial enterprise should be classified as cash flows arising from operating

activities. In the case of other enterprises, cash flows arising from interest paid should be

classified as cash flows from financing activities while interest and dividends received

should be classified as cash flows from investing activities. Dividends paid should be

classified as cash flows from financing activities.

The total amount of interest paid during the period is disclosed in the cash flow statement

whether it has been recognized as an expense in the statement of profit and loss or

capitalized in accordance with Accounting Standard (AS) 10, Accounting for Fixed

Assets. Interest paid and interest and dividends received are usually classified as

operating cash flows for a financial enterprise. However, there is no consensus on the

classification of these cash flows for other enterprises. Some argue that interest paid and

interest and dividends received may be classified as operating cash flows because they

enter into the determination of net profit or loss. However, it is more appropriate that

interest paid and interest and dividends received are classified as financing cash flows

and investing cash flows respectively, because they are cost of obtaining financial

resources or returns on investments.

Some argue that dividends paid may be classified as a component of cash flows from

operating activities in order to assist users to determine the ability of an enterprise to pay

dividends out of operating cash flows. However, it is considered more appropriate that

dividends paid should be classified as cash flows from financing activities because they

are cost of obtaining financial resources.

29

Taxes on Income

Cash flows arising from taxes on income should be separately disclosed and should be

classified as cash flows from operating activities unless they can be specifically identified

with financing and investing activities.

Taxes on income arise on transactions that give rise to cash flows that are classified as

operating, investing or financing activities in a cash flow statement. While tax expense

may be readily identifiable with investing or financing activities, the related tax cash

flows are often impracticable to identify and may arise in a different period from the cash

flows of the underlying transactions. Therefore, taxes paid are usually classified as cash

flows from operating activities. However, when it is practicable to identify the tax cash

flow with an individual transaction that gives rise to cash flows that are classified as

investing or financing activities, the tax cash flow is classified as an investing or

financing activity as appropriate. When tax cash 5 Pursuant to the issuance of AS 16

Borrowing Costs, which came into effect in respect of accounting periods commencing

on or after 1-4-2000, accounting for borrowing costs is governed by AS 16 from that

date.

b) Reporting Cash Flows from Investing and Financing Activities

An enterprise should report separately major classes of gross cash receipts and gross

cash payments arising from investing and financing activities, except to the extent that

cash flows are reported on a net basis.

Reporting Cash Flows on a Net Basis

1) .Cash flows arising from the following operating, investing or financing

activities may be reported on a net basis:

(a) Cash receipts and payments on behalf of customers when the cash flows

reflect the activities of the customer rather than those of the enterprise; and

30

(b)Cash receipts and payments for items in which the turnover is quick, the

amounts are large, and the maturities are short.

2) Examples of cash receipts and payments referred to in paragraph 1(a) are:

(a) The acceptance and repayment of demand deposits by a bank;

(b)Funds held for customers by an investment enterprise; and

(c) Rents collected on behalf of, and paid over to, the owners of properties.

Examples of cash receipts and payments referred to in paragraph 2(b) are

advances made for, and the repayments of:

(a) Principal amounts relating to credit card customers;

(b) The purchase and sale of investments; and

(c) Other short-term borrowings, for example, those which have a maturity period

of three months or less.

3) Cash flows arising from each of the following activities of a financial enterprise

may be reported on a net basis:

(a) Cash receipts and payments for the acceptance and repayment of deposits with

a fixed maturity date;

(b) The placement of deposits with and withdrawal of deposits from other

financial enterprises; and

(c) Cash advances and loans made to customers and the repayment of those

advances and loans.

Investments in Subsidiaries, Associates and Joint Ventures

When accounting for an investment in an associate or a subsidiary or a joint venture, an

investor restricts its reporting in the cash flow statement to the cash flows between itself

and the investee/joint venture, for example, cash flows relating to dividends and

advances. Acquisitions and Disposals of Subsidiaries and Other Business Units

31

The aggregate cash flows arising from acquisitions and from disposals of subsidiaries or

other business units should be presented separately and classified as investing activities.

An enterprise should disclose, in aggregate, in respect of both acquisition and disposal of

subsidiaries or other business units during the period each of the following:

(a) The total purchase or disposal consideration; and

(b) The portion of the purchase or disposal consideration discharged by means of

cash and cash equivalents.

The separate presentation of the cash flow effects of acquisitions and disposals of

subsidiaries and other business units as single line items helps to distinguish those cash

flows from other cash flows. The cash flow effects of disposals are not deducted from

those of acquisitions.

Non-cash Transactions

Investing and financing transactions that do not require the use of cash or cash

equivalents should be excluded from a cash flow statement. Such transactions should be

disclosed elsewhere in the financial statements in a way that provides all the relevant

information about these investing and financing activities.

Many investing and financing activities do not have a direct impact on current cash flows

although they do affect the capital and asset structure of an enterprise. The exclusion of

non-cash transactions from the cash flow statement is consistent with the objective of a

cash flow statement as these items do not involve cash flows in the current period.

Examples of non-cash transactions are:

(a) The acquisition of assets by assuming directly related liabilities;

(b) The acquisition of an enterprise by means of issue of shares; and

(c) The conversion of debt to equity.

32

Components of Cash and Cash Equivalents

An enterprise should disclose the components of cash and cash equivalents and should

present a reconciliation of the amounts in its cash flow statement with the equivalent

items reported in the balance sheet.

In view of the variety of cash management practices, an enterprise discloses the policy

which it adopts in determining the composition of cash and cash equivalents.

The effect of any change in the policy for determining components of cash and cash

equivalents is reported in accordance with Accounting Standard (AS) 5, Net Profit or

Loss for the Period, Prior Period Items and Changes in Accounting Policies.

Other Disclosures

An enterprise should disclose, together with a commentary by management, the amount

of significant cash and cash equivalent balances held by the enterprise that are not

available for use by it.

There are various circumstances in which cash and cash equivalent balances held by an

enterprise are not available for use by it. Examples include cash and cash equivalent

balances held by a branch of the enterprise that operates in a country where exchange

controls or other legal restrictions apply as a result of which the balances are not

available for use by the enterprise.

Additional information may be relevant to users in understanding the financial position

and liquidity of an enterprise. Disclosure of this information, together with a commentary

by management, is encouraged and may include:

(a) The amount of undrawn borrowing facilities that may be available for future operating

activities and to settle capital commitments, indicating any restrictions on the use of these

facilities; and

33

(b) The aggregate amount of cash flows that represent increases in operating capacity

separately from those cash flows that are required to maintain operating capacity.

DATA ANALYSIS AND INTERPRETATION

SIVASHAKTHI BIO PLANTTEC LIMITEDCASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2003. (Rs in lakhs)

PARTICULARSAmount (in Rs)

A. CASH FLOW FROM OPERATING ACTIVITIES

Net Profit (Loss)before tax and 6,823,578

Extra extraordinary items

Adjustments for:

Depreciation 11,046,171

Misc. Expenditure Written off 1,450

Profit on Sale of Fixed Assets

Other Income

Interest Received on FD (236,323)

Operating Profit (Loss) before working capital changes 17,634,876

Adjustments for:

Trade and other receivables (19,850,814)

Inventories 639,695

Trade Payables & Provisions 39,144,715

Cash generated from operations 37,568,472

Taxes Paid

CASH FLOW BEFORE EXTRAORDINARY ITEMS 37,568,472

Extraordinary items (Pro. Written back)

Net Cash From Operating Activities 37,568,472

B CASH FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (54,566,762)

Sale of Fixed Assets

Purchase Investment (5,000,000)

Other Income 236,323

34

Net cash used in investing activities (59,330,439)

PARTICULARS

Amount (in Rs)

Increase in Share Capital -

Proceeds from Long term barrowings 26,816,795

Repayment of finance/lease liabilities

Proceeds of Unsecured Loans 9,500,000

NET CASH USED IN FINANCING ACTIVITIES 36,316,794

Net increase in cash and cash equivalents 14,554,827

Cash and Cash equivalents as at 01-04-2002 17,344,694


(Closing balance)

35

SIVASHAKTHI BIO PLANTTEC LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2004. (Rs in lakhs)





Adjustments for:



Profit on Sale of Fixed Assets (156,195)

Other Income (138,959)



Adjustments for:

Trade and other receivables 5,368,905

Inventories (598,394)

Trade Payables 35,504,470

Cash generated from operations 66,295,465

Taxes Paid

CASH FLOW BEFORE EXTRAORDINARY ITEMS 66,295,465






Purchase Investment

Other Income 1,101,770


36



Proceeds from Long term barrowings

Repayment of finance/lease liabilities (5,112,701)

Repayment of Unsecured Loans -

NET CASH USED IN FINANCING ACTIVITIES (5,112,701)




(Closing balance)

37

Table IV.1. :- Cash Inflow For the Year 2003-04 (Rs in lakhs)

Particulars Amount (in Rs)

Operating profit 26,020,484

Trade & Other receivables 5,368,905

Other Income 1,101,770

Illustration IV.1:- Cash Inflow for the Year 2003-04

Interpretation:

During the year 2003-04 operating profit increased by Rs.26, 020,484/-, trade & other

receivables have decreased to Rs.5,368,905/-, and other income increased by

Rs.1,101,770/-.

38

Table IV.2. Cash Outflow For the Year 2003-04 (Rs in lakhs)


Inventories 598,394

Purchase of Fixed Assets 23,335,949


Long term borrowings 5,112,701

Illustration IV.2: Cash Outflow for the Year 2003-04

Interpretation:

During the year 2003-04 Purchase of fixed assets increased by Rs.23, 335,949/-,

Inventories have decreased to Rs.598, 394, trade payables increased by Rs.33, 127,250/-

and long term borrowings have decreased to Rs.5, 112,701/-.

39







Adjustments for:




Other Income (96,497)



Adjustments for:


Inventories (2,529,376)

Trade Payables (54,287,819)

Cash generated from operations (31,283,105)

Taxes Paid (153,173)

CASH FLOW BEFORE EXTRAORDINARY ITEMS (31,436,278)


Net Cash From Operating Activities (31,436,278)




Purchase Investment (58,580)



40


Increase in Share Capital 25,000,000

Proceeds from Long term barrowings


Repayment of Unsecured Loans (7,000,000)

NET CASH USED IN FINANCING ACTIVITIES 478,245

Net increase in cash and cash equivalents (37,970,749)



(Closing balance)

41

Table IV.3 : Cash Inflow For the Year 2004-05 (Rs in lakhs)


Operating Profit 24,288,581



share capital 25,000,000

Illustration IV.3: Cash Inflow for the Year 2004-05

Interpretation:

During the year 2004-05 operating profit have decreased to Rs.24, 288,581, Trade &

Other receivables have decreased to Rs.1,245,509/- and Other Income have decreased to

Rs.630,412/- Share capital increased by Rs.25, 000,000/-.

42

Table IV.4:Cash Outflow For the Year 2004-05 (Rs inlakhs)


Inventories 2,529,376


purchase of fixed assets 7,584,548

purchase of investments 58,580

Repayment of Finance 17,521,755

Repayment of Unsecured loans 7,000,000


Interpretation:

During the year 2004-05 cash outflows of Inventories increased by Rs.2,529,376/-, and

Trade Payables have decrease to Rs.50,678,440/-, purchase of Fixed assets have decrease

to Rs.7,584,548/-, purchase of investments increased by 58,580, repayment of finance

increased by Rs.17,521,755/-, and repayment of Unsecured Loans increased by

Rs.7,000,000/-.

43






Net increase in cash and cash equivalents 7,180,286 Cash and Cash equivalents as at 01-04-2005 32,877,357

Cash and Cash equivalents as at 01-04-2006

40,057,643

(Closing balance)

44







Adjustments for:



Profit on Sale of Fixed Assets 1,798,976


Adjustments for:



Trade Payables & Provisions (7,093,419)







Sale of Fixed Assets 7,318,835

Investment in Subsidiaries (23,000,000)

Profit on Sale of Investments & Other Income 723,352


Table IV.5: Cash Inflow For the Year 2005-06 (Rs in lakhs)

ParticularsAmount (in Rs)

Operating profit 45,329,042

Trade & Other Receivables 39,862,080


Profit on sale of investments & Other Income 723,352

Share Capital 57,300,000

Secured loans 22,048,597


Interpretation:

During the year 2005-06 operating profit increased by Rs.45,329,042/-, Trade & other

receivables Increased by Rs.39,862,080/- and sale of fixed assets increased to Rs.

7,318,835/-, share capital Increase to Rs.5,70,00,000/-, and long term borrowings

45

increase by Rs.22,048,597/- and profit on sale of investments & Other Income increased

by Rs.723,352/-.

Table IV.6:Cash Outflow For the Year 2005-06 (Rs in lakhs)




Purchase of Fixed assets 31,260,897

Investment on subsidiaries 23,000,000

Repayment of Liabilities 17,560,144


Interpretation:

During the year 2005-06 Inventories Increased by Rs. 6,763,000/-, Trade Payables have

decrease to Rs.7,093,419/-, purchase of fixed assets increased by 31,260,897/-,

46

Investment in Subsidiaries (Navabarat Fertilizers Limited) is Rs.23,000,000 and

Repayment of loans increased by 17,560,144 /-.

SIVASHAKTHI BIO PLANTTE LIMITED






Adjustments for:




Profit on Sale of Investment (7,625,356)

Interest Received (346,360)

Other income (42,000)


Adjustments for:



Trade Payables & Provisions (2,125,289)








Investment in Subsidiaries (80,000,000)

Profit on Sale of Investments & Other Income 8,013,716


47






Net increase in cash and cash equivalents (27,861,369)



(Closing balance)

Table IV.7: Cash Inflow for the Year 2006-07 (Rs in lakhs)

48


operating profit 80,755,936


profit on sale of investments& other income 8,013,716

Share Capital 69,293,720

Long term borrowings 71,883,646



Interpretation:

During the year 2006-07 Operating Profit increased by Rs.80,755,936/-, Sale of Fixed

assets increased by Rs.13,029,407 /-, Profit on Sale of Investments increased by

Rs.8,013,716/-, Share Capital Increased by Rs.69,293,720/- , working Capital loans

increased by 71,883,646/- and Trade receivables have increased to Rs.60,665,419/,

Table IV.8: Cash Outflow For the year 2006-07 (Rs in lakhs)Particulars

Amount (in Rs)

49


Trade payables & provisions 2,125,289

Purchase of fixed assets 79,567,583

Investments in Subsidiaries 80,000,000

Repayment of Finance 1,846,518

Illustration IV.8: Cash Outflow For the year 2006-07

Interpretation:

During the year 2006-07 Inventories increased by Rs.46,632,986/, Trade payables &

provisions have decreased to Rs.2,125,289/-,Purchase of fixed assets increased by

Rs.79,567,583/,Investments in subsidiaries increased by (Navabarat Fertilizers Limited)

Rs 80,000,000/-, and Repayment of Finance have decreased to Rs.1, 846,518/-



50





Adjustments for:



Profit on Sale of Fixed Assets -

Profit on Sale of Investment -

Interest Received -

Other income (4,632,,005)


Adjustments for:





74,458,827

CASH FLOW BEFORE EXTRAORDINARY ITEMS -



B .CASH FROM INVESTING ACTIVITIES



Investment in Subsidiaries -

Profit on Sale of Investments & Other Income 4,632,005

Net cash used in investing activities 23,157,573

51



Increased in Bank barrowings 2,379,276

Loan from Directors (16,800,000)





(Closing balance)

52

Table IV.9: Cash Inflow for the year 2007-08 (Rs in lakhs)


operating profit 90,338,501



Profit on sale of investments& other income 4,632,005Bank borrowings

2,379,276

Illustration IV.9: Cash Inflow for the year 2007-08

Interpretation:

During the year 2007-08 Operating Profit increased by Rs. 90,338,501/-, Trade receivables

& other receivables have decreased to Rs.29, 788,823/-, Sale of Fixed assets have

decreased to Rs. 12,119,688/-, Profit on Sale of Investments have decreased to Rs.

4,632,005/-, Bank borrowings have decreased to Rs.2,379,276/-.

Table IV.10: Cash Outflow For the year 2007-08 (Rs lakhs)

53



Trade payables & provisions 1,511,055

Purchase of fixed assets 68,052,947

Illustration IV.10: Cash Outflow For the year 2007-08

Interpretation:

During the year 2007-08 Cash outflows are Inventories Increased by Rs. 47,179,552 /-,

Trade payables & provisions have decreased to Rs.1, 511,055/- and Purchase of fixed

assets have decreased to Rs. 68,052,947 /,

V.1.FINDINGS

54

Major cash inflows of the company during 2004-08 are operating profit, trade &

other receivables and other income.

Major cash outflows of the company during 2004-08 are purchase of fixed assets

and investments in subsidiaries (Navabarat Fertilizers Limited).

The company has negative cash flows from investing activities through purchase

of fixed assets, investments from 2004-2008.

Through increase in share capital & working capital loans, the company owns the

results for financial activities.

The growth in operating profit from 2005-2008 gives positive results for the

company

The company has increased its share capital from 2005-2007 from 25,000,000-

69,293,720.

The operating activities from 2004-2008 shows positive cash flows for the

organization.

The company has increased its sale of fixed assets from 2006-2008 from

7,318,835-12,119,688.

The company is having credit limit with Banks.

V.2.CONCLUSIONS

55

Major cash outflows are related to operating profit, purchase of fixed assets share

capital, inventories, long term borrowings and investment in subsidiaries trade &

other receivables which are in satisfactory level.

Sivashakthi need to focus on improving the trade payables, purchase of

investments, and sale of fixed assets. To improve this Sivashakthi has to control

the following activities.

Losses on sale of fixed assets

Lack of bank borrowings

Average trade payables

The overall cash out flows of the Sivashakthi is in satisfactory level.

V.3.SUGGESTIONS

56

The company can take term loans from banks to acquire fixed assets and to

expand the business.

The credit limit with banks should be increased to expand the operations of the

company.

The company has to increase its cash flow from operating activities instead of

increasing in share capital.

It is necessary to mobilize the funds in investing activities.

The management of the company has to prepare the cash statements for predicting

the future.

The company can take working capital loans from banks.

The company has to prepare strategy for expanding the operations.

The company can increase its capital revenue by increasing its sale of fixed assets

BIBLIOGRAPHY

1. TEXT BOOKS

57

Financial Management, Prasanna Chandra, 5/e, Tata McGraw-hill Publication

Financial Management, I.M.Pandey, 8/e, Himalaya Publications.

Financial Management, M.Y.Kahn & P.K.Jain, 3/e, Tata McGraw-hill Publication

Company.

Financial Management, R.K.Sharma Shasi Guptha, 1/e, Kalyani publications.

Financial Management, Dr.S.N.Maheshwari,7/e, Principals and practice Sultan

chand and sons.

Financial Accounting, Horngreen, 8/e, Pearson education.

Financial Accounting Reporting & Analysis, Stice & Stice 1/e, Thomas

Publishers.

Financial Accounting Management, Ambrish Guptha, 1/e, Pearson education.

2. WEBSITES

www.sivashakthi.com

www.sbinfocanada.about.com

www.investorwords.com

58

http://www.investorwords.com/

http://www.sbinfocanada.about.com/

http://www.sivashakthi.com/

cash flow analysis

Documents

net cashflow

net cash flow

cash flow management

gross cashflow

cash flow problems

adequate cash flow

available cash

cash equivalents