The success of business beside other things depends upon the manner in which its Cash flow is managed. Thus, Cash flow is required as the life and blood of business concern. Cash flow management in simple term is the flow of funds which a company must have to finance its day to day operation. It includes the form near cash asset or even assets a little further from cash but yet in process of moving towards the cash from in short period. It comprises of stock of finished goods, semi-processed items, sundry debtors, cash and short-term investment, if any. Cash flow management throws light on adequacy of the firm and also risk of bankruptcy. If firm do not have adequate Cash i.e. it does not invest sufficient funds in current assets, it may become liquid and consequently may not have ability to met its current obligation and thus, invite risk of bankruptcy. It also focuses on key strategy and consideration trade off between profitability and liquidity of the firm. Management of Cash flow gives financial position, profitability and also efficient use of an individual current asset like cash, receivables and inventory.



The purpose of preparing a cash flow projection is to determine shortages or excesses in cash.

Ways to reduce the amount of cash paid out includes having fewer inventories, reducing purchases of equipment or other fixed assets, or eliminating some operating expenses. The objective is to finally develop a plan which, if followed, will provide a well-managed flow of cash. It involves the study of the existing pattern of cash flow

management in the organization.

Understand the types of transactions that result in cash flows from operating, investing, and financing activities.

To know the financial soundness of the company.

Develop an ability to analyze the statement of Projected cash flows, including the relation among cash flows from operating, investing, and financing activities for businesses in various stages of their growth.



• Lack of time for completing the study.

The company executives were able to give valuable time only for a few days in a week. Hence the required information could not be obtained.

This project report is based on the analysis of two years data which may not be sufficient to in some cases.

Time will be a major constraint.

The respondent may be biased.



The study conducted is a conclusive descriptive statistical study; the researcher comes to the decision which is precise and rational. The study is conclusive because after doing the study the researcher comes to a conclusion regarding the position of the brand in the minds of respondents of different firms groups. The study is statistical because throughout the study all the similar samples are selected and group together. All the similar responses are taken together as one and their percentages are calculated. Thus, this, conclusive descriptive statistical study is the best study for this purpose as it provides the necessary information which is utilize to arrive at a concrete decision.



Definition of Research:
The word research is derived from the Latin word meaning to know. It is a systematic and a replicable process, which identifies and defines problems, within specified boundaries. It employs well-designed method to collect the data and analyses the results. It disseminates the findings to contribute to generalize able knowledge. The characteristics of research presented below will be examined in greater details later are: Systematic problem solving which identifies variables and tests relationships between them, Collecting, organizing and evaluating data. Logical, so procedures can be duplicated or understood by others Empirical, so decisions are based on data collected Reductive, so it investigates a small sample which can be generalized to a larger population Replicable, so others may test the findings by repeating it. Discovering new facts or verify and test old facts. Developing new scientific tools, concepts and theories, this would facilitate to take decision. For the proper analysis of data simple statistical techniques such as percentage were use. It helps in making more generalization from the data available. The data which was collected from a sample of population was assumed to be representing entire population was interest. Demographic factors like age, income and educational background was used for the classification purpose.



Primary Data:

Primary data is collected with consultation and discussion with the concerned staff. The company whenever requires funds they arrange the funds from the internal sources. They arrange the funds from customer advance. The company mostly does not borrow funds from the banks. Whenever the company receives the money from the debtors they simultaneously pay to their creditors. The company has proper balances between the inflow and outflow of the funds through the debtors and creditors.

Secondary Data:

It was collected from the P&L A/c, balance sheet, reference books based on financial management & management accounting. The various books helped in understanding the various theoretical concepts

associated with the project such as the significance of Cash flow management & the way to interpret various funds. All the figures required to carry out the ratio analysis were gathered from financial statements such as P&L A/c, Balance sheet of the company




Name of Concerns

: 1) Varroc engineering Pvt. Ltd.

2) Varroc Polymers Pvt. Ltd.

Regd. Office

: Varroc Engineering Pvt. Ltd. E-4, India MIDC, Waluj, Aurangabad. (M.S.)


Phone: +91 240 2556227, Fax: +91 240 2564540. Email: Website:

Plant Address

: Varroc polymers Pvt. Ltd.(VPPL III) M-165-167 MIDC Industrial Area, Waluj, Aurangabad – 431 136, M.S. India

Telephone No. Fax Nos.

: +91-240-2551101/2563325. : +91-240-2551102

Website Constitution

: : Partnership Firms

Name of Promoters

: Mr.Naresh Chandra Jain – Chairman Mr. Tarang Jain – Managing Director R.S.C

MUMBAI UNIVERSITY Year of establishment : 1990.


: HDFC Bank

Work Exposures

: Hood, Foam and seat covers of all types of Vehicles like two and three wheelers his Division manufactures the following: Interior Console Exterior Parts- Bumpers, Fenders, Claddings, Wheel Arches Rubber Parts Mirror Assemblies and Mirror Plates Air Cleaner Assembly PU Foam Pad and Seating System. Pillar Trims, Door Panels, Floor

Companies Clients





: 27270286289V


: AABCM2508F


: AABCM2508FXM002


: AABCM2508FXM002


Office staff Supervisory Staff Technical Staff Quality Control Staff Skilled worker Unskilled worker Human Resource

: 08 : 10 : 06 : 02 : 12 : 75 : 03

Infrastructure facility:
They have a wide range of machinery out of which some machinery are most sophisticated special purpose machines on which any type of work of high precision and accuracy can be successfully carried out.





In the late eighties, as India opened up to liberalization, international companies and markets started looking at India with renewed interest. Amongst other industries, major international automobile and consumer durable companies saw India as a promising business destination and set up state-of-art manufacturing plants here. Varroc Group saw a vast potential in the automobile industry and focused on manufacturing and supplying of different components as well as setting up subassemblies for the booming automobile, consumer durable and white goods industry.



Varroc created three distinct divisions that would supply quality products to match global standards.

To manage growth in a highly competitive business environment, Varroc follows the principles of

Polymer Division Electrical Division Metallic Division Varroc's success stems from continuous improvements in

Strong Leadership Positive Work Environment Financial Discipline Varroc is focusing on three critical areas that give it world-class status

Quality Cost Innovation Delivery

Efficiency Innovation Reliability

Beginning with a venture in Aluminum Die Casting in 1985, the Jain Group made a successful foray into the automobile industry by manufacturing engineering products. However, with plastics making its presence felt in different aspects of life, the Jains foresaw a vast potential to expand its business in the booming automobile and consumer durable industries. This far-sight enabled them to sow the seeds of successful foray into polymer engineering. Consequently, Varroc Engineering was setup in the year 1990. It is operating through two divisions: Metallic and Electrical..

Varroc Group has 19 plants: 14 in Western India, 3 in Northern India and two in Europe with head quarters in Aurangabad, Maharashtra, INDIA. R.S.C


Export market in European and American Countries, Indonesia, Hong Kong, Singapore, Malaysia and also domestic customers in all Major cities. The percentage of export sales during last 3 years was 98.9%, 95.9%, and 95.65% respectively.

Varroc Group - Total Sales FY 2007-2008 US $ 450 Million

Market Segments:

Two Wheelers - 60% Four Wheelers and Earth Moving - 35% White Goods - 5 %

Varroc Engineering Pvt Ltd ( US $ 283.5 Million )

Electrical Division ( Sales US $ 166.5 Million)

The Electrical division manufactures and supplies: R.S.C


A.C. generators & Magneto Digital CDI, digital regulator rectifier units. Starter motors, wiper motors Switch assembly and handle bar assembly for motorcycle, LED lights Electronic control unit., Electronic Clusters

Metallic Division ( Sales US $ 117 Million )

The Metallic Division manufactures and supplies :

Engine Valves. Crank pins for motorcycles. Hot, cold & warm forged machined components. Catalytic converters for 2, 3 and 4 wheelers.

Varroc Polymers Pvt. Ltd. (US $ 166.5 Million)

This Division manufactures the following :

Interior Pillar Trims, Door Panels, Floor Console Exterior Arches Underbody/ HVAC parts Injection and Compression Molded Rubber Parts Mirror Assemblies and Mirror Plates Air Cleaner Assembly R.S.C PartsBumpers, Fenders,Claddings,Wheel

MUMBAI UNIVERSITY PU Foam Pad And Seating System Assembly Multilayer co-extruded Thermoplastic Sheets Molded parts for White Goods and Consumer Electronic Parts Series Molds and Pre Production Molds










companies manufacturing similar products is the in-house capability to design and manufacture custom tooling according to the customer’s requirement.

Varroc therefore offers a “one stop shop” for engineering plastics, with the capability to design a product based on only broad requirements provided by the client. This represents significant value addition over generic manufacturing of plastic moulded components. Tool Room:

General Capability to make Plastic and Rubber Mould. 7 State of Art CNC Machining Centre with CAM Facility. EDMs. Conventional Tool Room M/c's and Inspection equipments.



The product manufactured by the Company is fully guaranteed for its quality and workmanship. However, if the tool is damaged for some unforeseen reasons the damaged tool is replaced by the Complaint free of cost and the tool in replacement of the defective one is sent to the customer. This service is offered to all their valued customers.


The selection of the employees is done purely on the basis of their qualification. Such selected employees are given in-plant training in the Organization.


Since inception Varroc Group has maintained. A path sustained growth, responding pro actively to market’s new opportunities and customer needs. Propelling this dynamism has been our total commitment to quality and customer satisfaction. Regardless of other changes that processes will demand our conviction will remain steadfast. Varroc Group will continue to apply the very best of emerging technologies to match global standards. To complement Varroc Group organic growth, it will make strategic alliances with likeminded partners. In this way Varroc Group will move forward to meet the challenges of the new millennium.



Expand the horizon by targeting niche markets in the pharmaceutical industry. Attain corporate success and personal progress in an environment of integrity and fair practices Create products that maximizes customer satisfaction, while

improving the quality of human life. Provide products and services of high quality. Achieving customer satisfaction. HR Strategies: Do it on Kaizen Basis rather than disruptive/ drastic changes. Achieving up-gradation/changes through existing resources so that HR team can see HR and learn through ‘On the Job Training’ (OJT) approach. Improve each and every subcomponent of HR Architecture for systemic gains (synergy). DO it on authentic data-based decision matrix rather than guesstimates/ hunches. Make employees future ready – move them from ‘Command and Control’ mindsets to ‘Learning Organization’ paradigms. Upgrade the education/knowledge base of the existing employees to make them ‘Knowledge Workers’ for a long term future health of the organization.


MUMBAI UNIVERSITY HR Objectives: Making High Performance Work System (HPWS) where employees can grow both professionally as well as personally. Improve employee enthusiasm, involvement and commitment towards the organization. Improve the Quality of Work Life (QWL) and ensure a better Work Life balance. Be amongst the top 50 employers of choice, especially in Maharashtra. Become internal consultant to the organization. Create a Knowledge Management (KM) system to avoid reinvention of wheel and build on past strength. Move from P&A to HR and then to Strategic HRM





Varroc Group Sales Turnover



1. Pioneer, 2. Goodwill, 3. Quality, 4. Top management acceptance to dynamism, 5. Growing stage of product life cycle.

1. Lack of proper communication, (internal & external) 2. Lack of training department, 3. Quality unawareness at lowers level, 4. Less effective gales.

1.Large potential market still untapped, 2. Going for related diversification.

1.Increasing competition, 2.Increasing substitutes inn various areas for aluminium logos, names,
plates & label,

3.Very less product differentiation, 4.Low diversity.






Cash flow statement
In financial accounting, a cash flow statement or statement of cash flows is a financial statement that shows how changes in balance sheet and income accounts affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. International Accounting Standard 7 (IAS 7) is the International Accounting Standard that deals with cash flow statements. The success, growth and survival of every reporting entity depends on its ability to generate or otherwise obtain cash. Cash flow is a concept that everyone understands and with which they can identify. Reported profit is important to users of financial statements, but so too is the cash flow generating potential of an enterprise. What enables an entity to survive is the tangible resource of cash not profit, which is merely one indicator of financial performance. A cash flow statement (CFS) is important to external users, and should be of significant importance internally as well. Cash flow refers to the movement of cash into or out of a business, or project, or financial product. It is usually measured during a specified, finite period of time. Measurement of cash flow can be used.

To determine a project's rate of return or value. The time of cash flows into and out of projects are used as inputs in financial models such as internal rate of return, and net present value.

To determine problems with a business's liquidity. Being profitable does not necessarily mean being liquid. A company can fail because of a shortage of cash, even while profitable. R.S.C

MUMBAI UNIVERSITY As an alternate measure of a business's profits when it is believed that accrual accounting concepts do not represent economic realities. For example, a company may be notionally profitable but generating little operational cash (as may be the case for a company that barters its products rather than selling for cash). In such a case, the company may be deriving additional operating cash by issuing shares, or raising additional debt finance. Cash flow can be used to evaluate the 'quality' of Income generated by accrual accounting. When Net Income is composed of large noncash items it is considered low quality. To evaluate the risks within a financial product. E.g. matching cash requirements, evaluating default risk, re-investment requirements, etc. Cash flow is one of the most important aspects of running any business large or small. It is one of the single most important reasons why many businesses fail - regardless of how good the business is. Managing cash flow therefore is vitally important in the smooth running, survival and success of a business. This activity will look at what cash flow is, and use some examples to show how cash flow can make the difference between success and failure. Failure in this case means insolvency. If you are insolvent then you are unable to pay your debts. We often use the term 'bankrupt' to describe this but strictly, only an individual can be declared bankrupt. Companies are declared as insolvent. The principle however is the same. Some firms deal with so-called 'personal insolvency' which effectively means bankruptcy so the use of the terms can sometimes be confusing!


MUMBAI UNIVERSITY Business success might not be determined by how many customers you have, the quality of your product, the price or many other things - it might be down to a simple case of managing your cash flows!

Cash flow should not be confused with 'profit' - these are two different things. Profit refers to the difference between the total revenue (TR) and total cost (TC) over a period of time.

Most businesses, when starting up, will have to spend money to get things set up. In the example of the fruit business, the students had to spend out money on buying some of the main things they needed to run the business - the shed, the lab coats, the display boxes and the money box. These represented their 'fixed costs' - the costs that do not depend on the level of output or sales.

Money flowing out of the business

It should be clear from what we have said so far that the business will have to pay out money in order to carry out its activities. This is its 'expenditure'.

A business has a responsibility to pay all sorts of bills in carrying out its activities. In our simple example we have tried to keep the amount of information to a minimum. In a real business the firm will be paying out for all sorts of things. This will include paying wages to staff, insurance premiums, interest on loans, rent for premises, postage costs, heating, lighting, telephone bills, payments for paper, computers, photocopiers, water bills, rates and so on.


MUMBAI UNIVERSITY Some of these costs have to be paid monthly, others perhaps every three months, some might be paid yearly and in some cases costs might be incurred every day. In many cases, the business will know when it has bills that it has to pay.

The people to whom a business owes money are called the 'creditors'. If you enter into an agreement as a business with a creditor, you have an obligation to pay them. If you do not pay then the creditor could take you to court to force you to pay your debts. If this happens with lots of creditors then this could be the thing that causes the firm to become insolvent.

Money flowing into a business

To balance this out, the firm receives money from selling its goods and services. In our simple example, Fruit28 receives revenue from selling fruit. The revenue they receive depends on the amount they sell (Q) and the price that they charge (P). We can say therefore that Total Revenue (TR) = P x Q.

Bills will arise for all sorts of things - they all represent a flow of money out of the business and the business has to make sure it has enough cash to cover these debts when they are due.

Some businesses do not receive their revenue on such a regular basis. It will depend on the agreements they have with their customers. If a business is involved in selling goods to another business, for example, there might be an agreement that they will receive payment for goods R.S.C

MUMBAI UNIVERSITY supplied every 28 days, or possibly 3 months; it might be 6 months or even annually.

A firm will normally send an invoice to its customers to notify them how much they owe. The people who owe money to a firm are called 'debtors'. Payments do not always arrive when they should, however, which can be the start of the cause of cash flow problems

Some firms might see revenue rise at certain times of the year but at other times sales might be very slow. Toy shops for example, might expect to receive the vast majority of the revenue from sales in the period from September to December. The period from February to August might be very slow.

Revenue, therefore, does not come in at the same time as costs have to go out. This is the main problem facing firms and the whole point about cash flow. A firm has to manage its cash to ensure that it has enough money coming in to pay its bills. If it cannot pay a bill for some reason, it could perhaps negotiate with the creditor to delay the payment. However, it cannot keep doing this!

The importance of Cash flow planning is linked to liquidity of a business. In any business, there is a need for cash in running day-to-day operations. Some examples include the purchase of office stationary or fuel.

“Cash flow is simply Cash Receipts minus Cash Disbursements. That means Cash In versus Cash Out. “


MUMBAI UNIVERSITY These 'cash needs' of the firm would not be met should a business have its monies tied up in other areas. Examples include:

Credit sales - Having sold goods for n days of credit (ie company to be paid in n days). Credit sales is ok but too much would have effects on the business especially if it is not managing its cash flow. Assets - Purchases of assets like buildings and machinery must be checked against the cash flow management capacity of a firm given that they would become cash flow burdens to the firm after a purchase.




MUMBAI UNIVERSITY The diagram above helps to understand this idea of a 'flow'. If the money coming into the business is more than that going out, the business will have a surplus of cash.

If there is a problem in getting the money in from debtors (people who owe the business money) then the firm might face problems in paying its creditors (the people it owes money to). Many businesses, especially small ones, find that getting the money they are owed is not always easy. If they cannot pay their debts however, this can force the firm to have to close down.

Cash Flow Forecasts: Many businesses will be expected to prepare a cash flow forecast as part of their business planning. This means trying to plan out when costs will arise over the next year and also what they think their revenue is going to be. For a new firm, they might do this based on the market research they have conducted prior to starting in business. For an established firm, they R.S.C

MUMBAI UNIVERSITY might base their forecast revenue on what has happened to them in previous years. There are a few things we need to make clear about these forecasts. Receipts: This will be an estimate of the predicted sales revenue for each month. This is found by multiplying the amount the firm thinks it will sell by the price they charge. Payments: This section will detail the payments that the firm expects to have to make during the year. This will be added together to give a 'Total Payments' box for each month. Net Cash Flow: This will show the difference between the total payments and the receipts. For example, if in January a firm expects to receive £500 in revenue but will expect its total payments to be £650, it will have a net cash flow of -£150. This can either be put into the box as a minus number or is sometimes put in brackets (£150) to show that it is a negative figure. Opening Balance: This shows the money that a firm has carried over from a previous month. For example, in the case above, the firm would have to show that it had a negative cash flow of -£150 carried over from January in the box for 'opening balance' for February. Closing Balance: This is the difference between the net cash flow figure and the opening balance. Cash flows are classified into: Operational cash flows: Cash received or expended as a result of the company's internal business activities. It includes cash earnings


MUMBAI UNIVERSITY plus changes to working capital. Over the medium term this must be net positive if the company is to remain solvent. Investment cash flows: Cash received from the sale of long-life assets, or spent on capital expenditure (investments, acquisitions and long-life assets). Financing cash flows: Cash received from the issue of debt and equity, or paid out as dividends, share repurchases or debt repayments.

The cash flow statement was previously known as the statement of changes in financial position or flow of funds statement. The cash flow statement reflects a firm's liquidity or solvency. The balance sheet is a snapshot of a firm's financial resources and obligations at a single point in time, and the income statement summarizes a firm's financial transactions over an interval of time. These two financial statements reflect the accrual basis accounting used by firms to match revenues with the expenses associated with generating those revenues. The cash flow statement includes only inflows and outflows of cash and cash equivalents; it excludes transactions that do not directly affect cash receipts and payments. These noncash transactions include depreciation or write-offs on bad debts to name a few. The cash flow statement is a cash basis report on three types of financial activities: operating activities, investing activities, and financing activities. Noncash activities are usually reported in footnotes. The cash flow statement is intended to:


MUMBAI UNIVERSITY Provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances. Provide additional information for evaluating changes in assets, liabilities and equity. Improve the comparability of different firms' operating performance by eliminating the effects of different accounting methods.

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


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

Operating activities: Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising, and shipping the product. Operating cash flows include: Receipts from the sale of goods or services Receipts for the sale of loans, debt or equity instruments in a trading portfolio Interest received on loans Dividends received on equity securities Payments to suppliers for goods and services Payments to employees or on behalf of employees Interest payments

Items which are added back to [or subtracted from, as appropriate] the net income figure (which is found on the Income Statement) to arrive at cash flows from operations generally include: Depreciation (loss of tangible asset value over time) R.S.C

MUMBAI UNIVERSITY Deferred tax Amortization (loss of intangible asset value over time) Any gains or losses associated with the sale of a non-current asset, because associated cash flows do not belong in the operating

section.(unrealized gains/losses are also added back from the income statement)

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

Financing activities: Financing activities include the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders as dividends as the company generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement. Proceeds from issuing shares Proceeds from issuing short-term or long-term debt Payments of dividends R.S.C

MUMBAI UNIVERSITY Payments for repurchase of company shares Repayment of debt principal, including capital leases For non-profit organizations, receipts of donor-restricted cash that is limited to long-term purposes Dividends paid Sale or repurchase of the company's stock.


MUMBAI UNIVERSITY Preparation methods:

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

Direct method:

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

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



Rules: The following rules are used to make adjustments for changes in current assets and liabilities, operating items not providing or using cash and nonoperating items. Decrease in noncash current assets are added to net income Increase in noncash current asset are subtracted from net income Increase in current liabilities are added to net income Decrease in current liabilities are subtracted from net income Expenses with no cash outflows are added back to net income Revenues with no cash inflows are subtracted from net income

(depreciation expense is the only operating item that has no effect on cash flows in the period) Nonoperating losses are added back to net income Nonoperating gains are subtracted from net income



What is a projected cash flow statement?

The projected cash flow statement indicates the source and amount of income and expense activities for a given period in the future. It also shows when money will be borrowed and when it will be paid. The cash flow demonstrates the ability to repay a loan in a timely manner, something that is important to lenders. A projected cash flow statement also functions as a planning tool. You can anticipate situations when you will not have enough money to pay your bills. Then you can make

arrangements for other sources of funds to get you through cash flow crunches. Definition:

A cash flow projection is a forecast of cash funds a business anticipates receiving and paying out throughout the course of a given span of time, and the anticipated cash position at specific times during the period being projected. [For the purpose of

this projection, cash funds are defined as cash, checks, or money order, paid out or received.




The purpose of preparing a cash flow projection is to determine shortages or excesses in cash from that necessary to operate the business during the time for which the projection is prepared. If cash shortages are revealed in the project,

financial plans must be altered to provide more cash until a proper cash flow balance is obtained. For example, more owner cash, loans, increased selling prices of products, or less credit sales to customers will provide more cash to the business. Ways to reduce the amount of cash paid out includes having less inventory, reducing purchases of equipment or other fixed assets, or eliminating some operating expenses. If excesses of cash are revealed, it might indicated excessive borrowing or idle money that could be "put to work." The objective is to finally develop a plan which, if followed, will provide a well-managed flow of cash.



Most of the entries for the cash flow spreadsheet are selfexplanatory; however, the following suggestions are offered to simplify the procedure:

Suggest even dollars be used rather than showing cents. If this is a new business, or an existing business undergoing significant changes or alterations, the cash flow part of the column marked "Pre-start-up Position" should be completed. [Fill in appropriate blanks only.] Costs

involved here are, for example, rent, telephone, and utilities deposits before the business is actually open. Other items might be equipment purchases, alterations, the owner's cash injection, and cash from loans received before actual operations begin. Next fill in the pre-start-up position of the essential operating applicable. Complete the spreadsheet using the suggestions for each entry, provided in the partial spreadsheet on the next worksheet.







Difference between cash flow and fund flow

Fund flow statement Vs Cash Flow Statement

Both fund flow statement and cash flow statement serves as a fundamental parts of the financial statements. In 1961, the AICPA issued ARS No. 2, “Cash Flow Analysis and the Fund Statements “which recommended that a fund statement

covered by auditor’s opinion be included in companies financial reports.










International Accounting Standard [approved by the IASC Board in November1982 for publication in January 1983 and

supersedes the preface published in January 1975 (amended March 1978)], “the term ‘financial statements’. Covers balance sheets, income statement or profit and loss accounts,

statements of change in financial position, notes and other statements and explanatory materials which are identified as being part of financial statements” (IASC, 2000:32)

As per paragraph 7 of framework for the Preparation and Presentation of Financial Statements (approved by IASC board in April 1989 for publication in July 1989), “A complete set of financial statement normally includes a balance sheet, an


income statements, a statements of change in financial position (which may be presented in a variety of ways, for example as a statement of cash flow or a statement of fund flows) and those notes and other statements and explanatory material that are an integral part of the financial statements”.

As per paragraph 4 of the previous IAS 7 (October 1977), statements of change in financial position, the term ‘ funds’ referred to cash, cash and cash equivalents or working capital (IFAC, 1992: p.813). Funds provided or used in operation of an enterprise should be presented in the statements of changes in financial statement separately from other sources and uses of fund. Unusual items, which are not part of ordinary activities of the enterprise, should be separately disclosed (IASC: Para 21). But many users of financial statements considers current practices of reporting fund flows as confusing because too much information is compressed in the statements of change in financial position, and because no single definition has been established. (Mosich and Larsen, 1982; p. 935) In order to develop a conceptual framework for financial accounting and reporting the FASB issued in December 1980, a discussion memorandum” reporting Fund flow, Liquidity and Financial Flexibility” which was issued for the following reason.




For assessing future cash flow.


Current practices regarding the reporting of funds

flow information are not entirely satisfactory.

As a result of deliberation, FASB issued SFAS NO. 95 ‘Statements of Cash Flow’ in 1987. The statements requires the inclusion of statements of Cash Flows rather than a statement of Change in Financial position when issuing a complete set of financial statements which was made effective for annual periods ending after July 15, 1988. The major requirements of the statements are of the following two areas.

(a) Basis of Presentation. The statement must focuses on fund increase and decrease and must explain the change in cash plus cash equivalents. (b) Classification of Fund flows: Fund flows are to be classified according to operating, investing and financing

activities. The basis of such classification is derived from the financial theory, which state that enterprise derives the cash used for investing activities and settlement of outstanding financial obligation in an accounting period from internal and external sources. Internal cash sources emanate from the net


cash generated from current operation and perhaps disinvesting and depletion of cash resources at start of the period. External cash sources come from financing activities such as borrowing, and receiving cash from the sale of equity shares to existing and new shareholders.

Objective and Scope of IAS 7, Fund flow statements Information about the fund flows of an enterprise is useful in providing users of financial statements with a basis to assess the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilize those cash flows. The economic decision are taken by users require an evaluation of the ability of an enterprise to generate cash and cash equivalents and timing and certainty of their generation. The objective of IAS 7 is to require the provision of information about the historical change in cash and cash equivalents of an enterprise by means of a cash flow statement that classifies cash flows during the period from operating, investing and financing activities. An enterprise should prepare a cash flow statement in accordance with the requirements of IAS 7 and should present it as an integral parts of its financial statements for each period for which financial statements are prepared, Users of an enterprise’s financial statements are interested in how the enterprise generate and uses cash and cash

equivalents. This is the case regardless of the nature of the


enterprise activities and irrespective of whether cash can be viewed as the product of the enterprise, as may be the case with a financial organization. Enterprises need cash for the same reason s however different their principal revenueproducing activities might be. They need cash to conduct their operations, to pay their obligation s, to provide return to the investors. Accordingly this standard requires all enterprise to present a cash flow

























YEAR 2006 2007 2008 2009 2010 2011 2012 2013 NET PROFIT (IN CR.) (84.51) 818.74 553.22 936.69 1030.45 1133.59 1247.04 1371.83




YEAR 2006 2007 2008 2009 2010 2011 2012 2013 NET SALES (IN CR.) 6556.81 8924.17 8425.12 18570.19 20427.21 22469.93 24716.93 27188.62




Assumption for the year 31/03/2009 to 31/03/2013 For sales company have good track record of sales since last three as per company data so I assume that company have good prospect in future of growing sale as per I projected. For expenses as projected that sales will grow at the projected growth rate the expenses will also grow with the proportion to sales to fulfill the sales requirement. As per company law company doesn’t transfer any amount to any reserve and all the profit is transfer to balance sheet for further growth. Coming to balance sheet I assume that as per growing of company and as per growing of sales company want funds to complete the assigned project so company require funds that Fund Company will collect from share holder as per requirement. For unsecured loan I assume that company will repay the unsecured mainly from relative through available cash in hand at the rate of 10% P.A. with interest For term loan I assume that by growth in earning profit company is sufficient to pay term loan as per I projected Coming to assets side of the balance sheet company showing that fixed assets growing in the later year like in 2010 ,2011, 2013 because as per assumption to fulfill or to complete the project company wants machinery. All current assets are growing with the growing rate of sales. All current liability are also growing at the rate of company will get the assignments as per projection R.S.C


Cash flow statement cannot be equated with the income statement. An income statement takes into account both cash as well as non-cash items and therefore, net cash flow does not necessarily mean net income of the business. It reports the effects on cash flows of a firm’s operating, investing and financing activities. Cash flow measures the amount of cash that a company brings in and uses during the course of an accounting period (quarter or year) after all fixed expenses are eliminated. Net profit ratio is in decline in first year. So it is not good for the company. Debtor’s ratio is in the every year which is less than previous year, high is good for the company. It shows stable condition of supply of the company. Creditors are decrease in first two years. It shows creditors collection period is less than previous year. It is not good for the company.



The cash position at the end of each year should be adequate to meet the cash requirements for the following year. If too little cash, then additional cash will have to be injected or cash paid out must be reduced. If there is too much cash on hand, this money is not working for your business.

The cash balance as disclosed by the projected cash flow statement may not represent the real liquid position of the company since it can be easily influenced by postponing purchases and other payments

The projection becomes more useful when the estimated information can be compared with actual information as it develops. It is important to follow through and complete the actual columns as the information becomes available. Utilize the cash flow projection to assist in setting new goals and planning operations for more profit.



Decrease in the creditors from one period to another period will result of decrease of cash from operation it means more cash payments have been made to creditors. So company should increase the creditors. Same as in debtors company should decrease debtors to maintain the cash The working capital requirement of the company has increased with the increase in inventories, debtors and creditors, company should follow sound strategy so that the inventories and creditors are minimized and cash in hand is increased. In the actual cash flow the cash in hand or at bank is very less company so should keep sound cash in hand or cash at bank. Investment for long term shall be done. The factory should try to maintain Cash Flow to the extent of optimum level. The company should reduce the capital expenditure. The factory should try to collect additional share capital from the share-holders and Repay the long-term secured and unsecured loan.



VARROC POLYMERS PVT. LTD. (VPPL III) PROFIT & LOSS ACCOUNT Particulars A Income: Sales Including Excise Duty Less: Excise Duty Net Sales Other Income B Expenditure: Materials Expenses Interest Depreciation/Amortisation SCH 2006 6,556.81 759.02 5,797.79 21.66 5,819.45 5,170.00 564.81 90.03 79.12 5,903.97 Actual 2007 8,924.17 1,165.99 7,758.19 30.07 7,788.26 6,163.08 633.01 109.98 63.45 6,969.52 2008 8,425.12 1,170.04 7,255.08 16.42 7,271.50 5,962.03 568.81 115.87 71.57 6,718.28


14 15 16

Add: Depreciation written back Profit Before Taxation Provision for Taxation Current Taxation Fringe Benefit Tax Profit for the Year Expenses for Earlier years Balance Profit Add: Profit Brought Forward Balance Profit Available for Appr. Balance Carried to Balance Sheet -84.51 818.74 553.22

-84.51 -84.51 1,115.06 1,030.55 1,030.55 1,030.55

818.74 818.74 1,030.55 1,849.29 1,849.29 1,849.29

553.22 553.22 1,849.29 2,402.51 2,402.51 2,402.51



VARROC POLYMERS PVT. LTD. (VPPL-III) SCHEDULES FORMING PART OF BALANCE SHEET Particulars Schedule: 1 Share Capital: Schedule: 2 Reserves & Surplus General Reserve Balance brought Forward Profit & Loss Account Schedule: 3 Secured Loans: Term Loans: Cash Credit from Banks Schedule: 4 Unsecured Loans: Schedule: 5 Schedule: 6 Investments (At Cost, Unquoted) Schedule: 7 Inventories: Raw Material Work In Process Finished Goods Stores & Spares Tools & Instruments Packing Material Stock of Trading Items Goods In Transit - At Cost 2006 Actual 2007 2008

1,030.55 1,030.55

1,849.29 1,849.29

2,402.51 2,402.51

318.90 318.90 2,000.00 2,000.00

312.88 312.88 980.00 980.00 1,200.00 1,200.00

77.24 34.44 9.76 19.76 1.52 4.84 9.31 156.88 41.36 198.24

99.98 49.17 3.47 20.29 2.47 1.10 0.72 177.20 263.51 440.72

41.05 50.15 2.84 31.37 3.03

128.43 128.43



VARROC POLYMERS PVT. LTD. (VPPL-III) SCHEDULES FORMING PART OF BALANCE SHEET Particulars Schedule: 8 Sundry Debtors: (unsecured, Considered Good) Add: Considered Doubtful Total Over Six month Less: Bad & Doubtful Debts Others Schedule: 9 Cash & Bank Balances: Cash In Hand Current Account Fixed Deposits Interest Accrued on Fixed Deposits Schedule: 10 Loans & Advdances: (unsecured,Considered Good) Advances Recoverable in Cash or kind or for Value to be received Balance with Excise Department Sundry Deposits Advances Tax & Tax Deducted at Source Interest Receivable Receivable from Varroc Eng. Pvt. Ltd. Loan Repaid Schedule: 11 Current Liabilities: Sundry Creditors for Supplies Sundry Creditors for Capital Goods Other payble Expenses Payble Interest Accrued but not due on Loans 2006 Actual 2007 2008

14.48 14.48 1,213.12 1,227.60

46.21 46.21 1,200.00 1,246.21

0.23 7.91 8.14 7.91 1,214.23 1,214.46

45.00 0.40 10.17 0.18 55.75

65.00 0.90

76.00 58.56



37.32 17.20 4.24 22.80 0.17 10.00 91.73

76.66 29.64 4.24 35.89 0.17 22.00 168.59

30.48 0.30 4.24 47.78 0.18 5,563.65 35.09 5,681.71

600.00 15.61 55.84 61.77 733.22

952.22 5.10 139.67 100.47 1,197.46

1,008.00 1.57 30.21 30.50 9.77 1,080.05



Schedule: 12 Provisions for: Leave Encashment Schedule: 13 Other Income: Intrest - Gross (TDS Rs/-) Fixed Deposits With Banks Others Profit on sale of Fixed Assests Miscellaneous Receipts Excess Provision Written back Foreign Exchange Fluctuation - Gain Schedule: 14 Materials: A) Raw Materials Consumed Opening Stocks Add: Purchases Less: Closing Stocks (A) B) Increase/(Decrease) in Stocks Closing Stock - Finished Goods - Working in Process Less: Opening Stock-Finished Goods -Work in Process (B) C) Excise Duty on Finished Goods Opening Stock Closing Stocks Net (C) Cost of Trading Items Sold 2.97 2.97 1.95 1.95 5.76 5.76

0.23 0.25 19.40 1.78 21.66

0.48 0.24 0.00 9.84 1.02 18.49 30.07

0.23 4.40 11.79 0.00 16.42

106.86 4,130.19 4,237.05 77.24 4,159.80 9.76 34.44 44.20 9.01 97.85 106.86 -62.66 1.32 1.51 0.20 4,097.34 1,072.67 5,170.00

77.24 5,588.78 5,666.02 99.98 5,566.04 3.47 49.17 52.64 9.76 67.48 77.24 -24.60 1.51 0.51 -1.00 5,540.44 622.64 6,163.08

99.98 5,925.22 6,025.20 41.05 5,984.15 2.84 50.15 52.99 3.47 96.51 99.98 -47.00 0.51 0.39 -0.13 5,937.03 25.00 5,962.03



VARROC POLYMERS PVT. LTD. (VPPL-III) SCHEDULES FORMING PART OF BALANCE SHEET Particulars Schedule: 15 Expenses: Stores & Spares Consumed Tools & Instruments Packing Material Consumed Labour Charges Power & Water Freight Salary,Wages & Bonus Gratuty Provision & Contribution Contribution to Provident Fund Staff Welfare Repairs: A) Machinery B) Building C) General Insurance Rates & Taxes Excise Duty Paid Foreign Exchange Fluctuation - Loss Amount Written Off Against Lease Hold Land Rent Provision for Bad & Doubtful Debts Miscllaneous Expenses Schedule: 16 Interest On: Term Loans Bank Overdraft Others 2006 2007 2008

33.19 0.04 27.64 274.22 28.08 81.97 56.99 0.66 3.72 2.53 0.00 7.55 2.64 7.62 5.33 0.75 0.07 2.57 0.90 0.70 0.00 27.65 564.81

25.51 0.05 27.96 325.81 34.55 68.59 71.96 0.79 5.08 4.17 0.00 9.13 1.19 7.16 5.48 1.77 0.06 4.88 0.90 0.72 0.00 37.24 633.01

41.25 0.49 5.99 295.24 35.46 56.23 64.43 0.43 4.56 3.75 0.00 6.84 1.45 16.95 2.39 7.83 0.00 -16.01 0.90 0.28 7.91 32.44 568.81

89.99 0.04 90.03

109.98 109.98

115.87 115.87



SR. PATICULARS NO. A Cash Flow from Operating Activities Net Profit before Tax & Earlier Expenses Adjustment for: Add: Depreciation Lease Written Off Provision for Leave Encashments Interest Paid Less: Interest Received Operating Profits before Working Capital Changes Add: Increase in Creditors Less: Increase in Inventories Increase in Debtors Cash Generated from Operations Less: Interest Paid Income Tax Paid Wealth Tax Paid Net Cash from Opereating Activities B Net Cash from Investing Activities Add: Interest Received Sale of Fixed Assets Less: Capital Expenditure Net Cash used in Investing Activities C Cash Flow from Financing Activities Add: Increase in Term Loans Increase in Cash Credits Increase in Unsecured Loans Less: Loan Repaid Net Cash used in Financing Activities Net Cash & Cash Equivalants Opening Cash & Bank Balance on 01.04.07 Closing Cash & Bank balance on 31.03.07 ACTUAL 2006-2007 818.74 2007-2008 553.22

63.45 15.80 109.98 0.73

189.23 0.73 1007.24

71.57 15.80 115.87 0.23

203.24 0.23 756.23

464.24 242.48 (18.61) 109.98 13.09 55.90

240.37 1247.61

(117.41) (312.29) 31.75 115.87 11.89 70.89

(397.94) 358.29

178.97 1068.64

198.65 159.64

0.73 6.23 80.09

6.96 (73.13) (73.13)

0.23 17.87 100.00

18.10 (81.90) (81.90)

6.02 (1020.00) (12.00) (A+B+C)

(1001.98) (1001.98) (6.47) 55.75 49.28

(312.88) 220.00 (13.09) (A+B+C)

(79.79) (79.79) (2.05) 49.28 47.23




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