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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




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




• 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.


this. the researcher comes to the decision which is precise and rational. 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. The study is statistical because throughout the study all the similar samples are selected and group together.C . Thus. R. All the similar responses are taken together as one and their percentages are calculated. 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.S. MUMBAI UNIVERSITY TYPES & TECHNIQUES The study conducted is a conclusive descriptive statistical study.

so decisions are based on data collected  Reductive.C . R. so others may test the findings by repeating it.  Developing new scientific tools. For the proper analysis of data simple statistical techniques such as percentage were use. It is a systematic and a replicable process. Demographic factors like age. It employs well-designed method to collect the data and analyses the results. income and educational background was used for the classification purpose.  Logical. It disseminates the findings to contribute to generalize able knowledge. within specified boundaries. 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. this would facilitate to take decision.  Collecting.S. which identifies and defines problems.  Discovering new facts or verify and test old facts. MUMBAI UNIVERSITY RESEARCH METHODOLOGY Definition of Research: The word research is derived from the Latin word meaning to know. 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. so it investigates a small sample which can be generalized to a larger population  Replicable. concepts and theories. so procedures can be duplicated or understood by others  Empirical. organizing and evaluating data.

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.C .S. They arrange the funds from customer advance. The company whenever requires funds they arrange the funds from the internal sources. All the figures required to carry out the ratio analysis were gathered from financial statements such as P&L A/c. Whenever the company receives the money from the debtors they simultaneously pay to their creditors. Secondary Data: It was collected from the P&L A/c. The company mostly does not borrow funds from the banks. Balance sheet of the company R. reference books based on financial management & management accounting. MUMBAI UNIVERSITY Primary Data: Primary data is collected with consultation and discussion with the concerned staff. balance sheet. The company has proper balances between the inflow and outflow of the funds through the debtors and creditors.

: +91-240-2551101/2563325. Phone: +91 240 2556227. Waluj. Fax: +91 240 India Telephone No. Waluj. MIDC.S. (M. Plant Address : Varroc polymers Pvt. Ltd.Naresh Chandra Jain – Chairman Mr. Ltd. : +91-240-2551102 Website : www.S.S. 2) Varroc Polymers Pvt. Office : Varroc Engineering Pvt. Aurangabad. Fax Website: http://www. Email: varroc.varrocengg. MUMBAI UNIVERSITY VERROC GROUP COMPANY PROFILE Name of Concerns : 1) Varroc engineering Pvt.C . M. Ltd.verrocengg. Regd. Aurangabad – 431 136.(VPPL III) M-165-167 MIDC Industrial Area. Tarang Jain – Managing Director R. Constitution : Partnership Firms Name of Promoters : Mr.) India 431136.

Floor Console Exterior Parts.C .Bumpers. MUMBAI UNIVERSITY Year of establishment : 1990. Door Panels. Wheel Arches Rubber Parts Mirror Assemblies and Mirror Plates Air Cleaner Assembly PU Foam Pad and Seating System. Foam and seat covers of all types of Vehicles like two and three wheelers his Division manufactures the following: Interior Pillar Trims. Fenders. Bankers : HDFC Bank Work Exposures : Hood. Claddings. Companies Clients : R.S.

: 27270286289V PAN NO.S. : AABCM2508FXM002 SERVICE TAX NO. MUMBAI UNIVERSITY TAN NO. R. : NSKV02183G VAT NO.C . : AABCM2508F EXCISE REG. : AABCM2508FXM002 MAN POWER VPPL Office staff : 08 Supervisory Staff : 10 Technical Staff : 06 Quality Control Staff : 02 Skilled worker : 12 Unskilled worker : 75 Human Resource : 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.NO.


C . major international automobile and consumer durable companies saw India as a promising business destination and set up state-of-art manufacturing plants here. consumer durable and white goods industry. R. Amongst other industries.S. MUMBAI UNIVERSITY Preamble: In the late eighties. 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. as India opened up to liberalization. international companies and markets started looking at India with renewed interest.

. R. Varroc Group has 19 plants: 14 in Western India. Varroc Engineering was setup in the year 1990. INDIA. 3 in Northern India and two in Europe with head quarters in Aurangabad. Consequently. 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. Maharashtra. MUMBAI UNIVERSITY Varroc created three distinct To manage growth in a highly divisions that would supply quality competitive business environment. It is operating through two divisions: Metallic and Electrical. the Jain Group made a successful foray into the automobile industry by manufacturing engineering products. Varroc follows the principles of  Polymer Division  Strong Leadership  Electrical Division  Positive Work Environment  Metallic Division  Financial Discipline Varroc's success stems from Varroc is focusing on three critical continuous improvements in areas that give it world-class status  Quality  Efficiency  Cost Innovation  Innovation  Delivery  Reliability Beginning with a venture in Aluminum Die Casting in 1985. However. products to match global standards.S.C . with plastics making its presence felt in different aspects of life.

9%.35%  White Goods .65% respectively. MUMBAI UNIVERSITY Export market in European and American Countries.5 Million) The Electrical division manufactures and supplies: R. Indonesia. 95.Total Sales FY 2007-2008 US $ 450 Million Market Segments:  Two Wheelers .60%  Four Wheelers and Earth Moving . Varroc Group .5 % Varroc Engineering Pvt Ltd ( US $ 283. The percentage of export sales during last 3 years was 98. Malaysia and also domestic customers in all Major cities. Hong Kong. Singapore.5 Million ) Electrical Division ( Sales US $ 166.9%.S.C . and 95.

Wheel Arches  Underbody/ HVAC parts  Injection and Compression Molded Rubber Parts  Mirror Assemblies and Mirror Plates  Air Cleaner Assembly R. cold & warm forged machined components. LED lights  Electronic control unit. generators & Magneto  Digital CDI.  Starter motors. 3 and 4 wheelers. Bumpers. Ltd. Fenders. Floor Console  Exterior Parts. Varroc Polymers Pvt. Electronic Clusters Metallic Division ( Sales US $ 117 Million ) The Metallic Division manufactures and supplies :  Engine Valves.5 Million) This Division manufactures the following :  Interior Pillar Trims..S.Claddings. Door Panels.  Crank pins for motorcycles. digital regulator rectifier units.C. wiper motors  Switch assembly and handle bar assembly for motorcycle. (US $ 166.  Catalytic converters for 2.  Hot.C . MUMBAI UNIVERSITY  A.

This represents significant value addition over generic manufacturing of plastic moulded components.  7 State of Art CNC Machining Centre with CAM Facility. Varroc therefore offers a “one stop shop” for engineering plastics. Tool Room:  General Capability to make Plastic and Rubber Mould. with the capability to design a product based on only broad requirements provided by the client. R.  Conventional Tool Room M/c's and Inspection equipments.  EDMs. 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 A key differentiator between Varroc’s Polymer division and other companies manufacturing similar products is the in-house capability to design and manufacture custom tooling according to the customer’s requirement.S.C .

However.C . This service is offered to all their valued customers. Varroc Group will continue to apply the very best of emerging technologies to match global standards. SELECTION & TRAINING: The selection of the employees is done purely on the basis of their qualification. MUMBAI UNIVERSITY SERVICES OFFERED: The product manufactured by the Company is fully guaranteed for its quality and workmanship.S. To complement Varroc Group organic growth. VISION: Since inception Varroc Group has maintained. 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. Such selected employees are given in-plant training in the Organization. responding pro actively to market’s new opportunities and customer needs. it will make strategic alliances with likeminded partners. A path sustained growth. Regardless of other changes that processes will demand our conviction will remain steadfast. In this way Varroc Group will move forward to meet the challenges of the new millennium. Propelling this dynamism has been our total commitment to quality and customer satisfaction. R.

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


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
 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


3.C . 4. OPPORTUNITIES: 1. 3. THREATS: 1. 2. names. Quality. WEAKNESS: 1.Low diversity. Less effective gales. (internal & external) 2. 2. 3. Top management acceptance to dynamism.S. Lack of training department. Goodwill. 2.Increasing substitutes inn various areas for aluminium logos. Quality unawareness at lowers level. Growing stage of product life cycle.Very less product differentiation. plates & label. 4. 4. 5. R.Large potential market still untapped. Lack of proper communication.Increasing competition. Going for related diversification. MUMBAI UNIVERSITY STRENGTH: 1. Pioneer.


particularly its ability to pay bills. A cash flow statement (CFS) is important to external users. It is usually measured during a specified. investing. A company can fail because of a shortage of cash.C .S. As an analytical tool. but so too is the cash flow generating potential of an enterprise. Being profitable does not necessarily mean being liquid. MUMBAI UNIVERSITY Cash flow statement In financial accounting. Cash flow is a concept that everyone understands and with which they can identify. 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. R. and breaks the analysis down to operating. growth and survival of every reporting entity depends on its ability to generate or otherwise obtain cash. finite period of time. and financing activities. or financial product. Cash flow refers to the movement of cash into or out of a business. International Accounting Standard 7 (IAS 7) is the International Accounting Standard that deals with cash flow statements. which is merely one indicator of financial performance. even while profitable. and should be of significant importance internally as well. The time of cash flows into and out of projects are used as inputs in financial models such as internal rate of return. What enables an entity to survive is the tangible resource of cash not profit. and net present value. the statement of cash flows is useful in determining the short-term viability of a company. Measurement of cash flow can be used. or project. Reported profit is important to users of financial statements. The success.  To determine problems with a business's liquidity.  To determine a project's rate of return or value.

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

water bills.S.C . when starting up. MUMBAI UNIVERSITY Business success might not be determined by how many customers you have. the quality of your product. This will include paying wages to staff. payments for paper.these are two different things.the shed. This is its 'expenditure'. will have to spend money to get things set up. photocopiers. 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 might be down to a simple case of managing your cash flows! Cash flow should not be confused with 'profit' . rates and so on. R. rent for premises.the costs that do not depend on the level of output or sales. the display boxes and the money box. These represented their 'fixed costs' . In the example of the fruit business. A business has a responsibility to pay all sorts of bills in carrying out its activities. postage costs. Profit refers to the difference between the total revenue (TR) and total cost (TC) over a period of time. insurance premiums. heating. In a real business the firm will be paying out for all sorts of things. the students had to spend out money on buying some of the main things they needed to run the business . interest on loans. computers. In our simple example we have tried to keep the amount of information to a minimum. telephone bills. Most businesses. lighting. the price or many other things . the lab coats.

for example. The revenue they receive depends on the amount they sell (Q) and the price that they charge (P). If you enter into an agreement as a business with a creditor. others perhaps every three months. The people to whom a business owes money are called the 'creditors'. some might be paid yearly and in some cases costs might be incurred every day. Fruit28 receives revenue from selling fruit. In many cases. It will depend on the agreements they have with their customers.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. If this happens with lots of creditors then this could be the thing that causes the firm to become insolvent. you have an obligation to pay them.C . Money flowing into a business To balance this out. In our simple example. MUMBAI UNIVERSITY Some of these costs have to be paid monthly.S. If a business is involved in selling goods to another business. the business will know when it has bills that it has to pay. We can say therefore that Total Revenue (TR) = P x Q. Bills will arise for all sorts of things . If you do not pay then the creditor could take you to court to force you to pay your debts. there might be an agreement that they will receive payment for goods R. the firm receives money from selling its goods and services.

therefore. “ R. Revenue. it could perhaps negotiate with the creditor to delay the payment.C . Some examples include the purchase of office stationary or fuel. If it cannot pay a bill for some reason. That means Cash In versus Cash Out. 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. A firm will normally send an invoice to its customers to notify them how much they owe. MUMBAI UNIVERSITY supplied every 28 days. This is the main problem facing firms and the whole point about cash flow. Toy shops for example. The period from February to August might be very slow. however. However. A firm has to manage its cash to ensure that it has enough money coming in to pay its bills.S. or possibly 3 months. does not come in at the same time as costs have to go out. Payments do not always arrive when they should. there is a need for cash in running day-to-day operations. might expect to receive the vast majority of the revenue from sales in the period from September to December. The people who owe money to a firm are called 'debtors'. it might be 6 months or even annually. “Cash flow is simply Cash Receipts minus Cash Disbursements. In any business. it cannot keep doing this! The importance of Cash flow planning is linked to liquidity of a business.

Having sold goods for n days of credit (ie company to be paid in n days). Examples include:  Credit sales . Credit sales is ok but too much would have effects on the business especially if it is not managing its cash flow. R.S.C . MUMBAI UNIVERSITY These 'cash needs' of the firm would not be met should a business have its monies tied up in other areas.  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.


find that getting the money they are owed is not always easy. If the money coming into the business is more than that going out. Cash Flow Forecasts: Many businesses will be expected to prepare a cash flow forecast as part of their business planning. they R. For an established firm. 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. If they cannot pay their debts however.C .S. especially small ones. this can force the firm to have to close down. For a new firm. Many businesses. they might do this based on the market research they have conducted prior to starting in business. 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). MUMBAI UNIVERSITY The diagram above helps to understand this idea of a 'flow'.

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

acquisitions and long-life assets). 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. The balance sheet is a snapshot of a firm's financial resources and obligations at a single point in time. These noncash transactions include depreciation or write-offs on bad debts to name a few. or paid out as dividends. The cash flow statement is a cash basis report on three types of financial activities: operating activities.  Financing cash flows: Cash received from the issue of debt and equity. or spent on capital expenditure (investments. and the income statement summarizes a firm's financial transactions over an interval of time. MUMBAI UNIVERSITY plus changes to working capital. share repurchases or debt repayments. Purpose: The cash flow statement was previously known as the statement of changes in financial position or flow of funds statement.C . and financing activities. The cash flow statement reflects a firm's liquidity or solvency. Noncash activities are usually reported in footnotes. it excludes transactions that do not directly affect cash receipts and payments. The cash flow statement includes only inflows and outflows of cash and cash equivalents. investing activities. The cash flow statement is intended to: R.S. These two financial statements reflect the accrual basis accounting used by firms to match revenues with the expenses associated with generating those revenues.

liabilities and equity. namely: cash flow resulting from operating activities.  Provide additional information for evaluating changes in assets. cash flow resulting from investing activities. Cash flow activities: The cash flow statement is partitioned into three segments. and cash flow resulting from financing activities.C .S.  Improve the comparability of different firms' operating performance by eliminating the effects of different accounting methods. MUMBAI UNIVERSITY  Provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances. R.

advertising. This could include purchasing raw materials. Operating cash flows include: Receipts from the sale of goods or services Receipts for the sale of loans. and money going out from the business is called cash outflow. Operating activities: Operating activities include the production. 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. MUMBAI UNIVERSITY The money coming into the business is called cash inflow. sales and delivery of the company's product as well as collecting payment from its customers. building inventory.C . and shipping the product. 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.S.

because associated cash flows do not belong in the operating section.) Loans made to suppliers or customers. Proceeds from issuing shares Proceeds from issuing short-term or long-term debt Payments of dividends R. etc. as well as the outflow of cash to shareholders as dividends as the company generates income.S. 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.C . building. 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. equipment marketable securities. Financing activities: Financing activities include the inflow of cash from investors such as banks and shareholders.(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.

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

and an increase in a liability account is added back to net income. because FAS 95 requires a supplementary report similar to the indirect method if a company chooses to use the direct method. This method converts accrual-basis net income (or loss) into cash flow by using a series of additions and deductions. Dividends received may be reported under operating activities or under investing activities. Direct method: The direct method for creating a cash flow statement reports major classes of gross cash receipts and payments. then adjusts for all cash-based transactions. If taxes paid are directly linked to operating activities. R. makes adjustments for all transactions for non-cash items. The indirect method is almost universally used. they are reported under operating activities.S.C . if the taxes are directly linked to investing activities or financing activities. MUMBAI UNIVERSITY Preparation methods: The direct method of preparing a cash flow statement results in a more easily understood report. Indirect method: The indirect method uses net-income as a starting point. they are reported under investing or financing activities. An increase in an asset account is subtracted from net income.

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 R.C .S. MUMBAI UNIVERSITY Rules: The following rules are used to make adjustments for changes in current assets and liabilities.

or money order. Then you can make arrangements for other sources of funds to get you through cash flow crunches. something that is important to lenders. and the anticipated cash position at specific times during the period being projected. MUMBAI UNIVERSITY 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. cash funds are defined as cash. A projected cash flow statement also functions as a planning tool.C . R. paid out or received.S. 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. checks. [For the purpose of this projection. It also shows when money will be borrowed and when it will be paid. You can anticipate situations when you will not have enough money to pay your bills. The cash flow demonstrates the ability to repay a loan in a timely manner.

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

provided in the partial spreadsheet on the next worksheet. [Fill in appropriate blanks only. MUMBAI UNIVERSITY Procedure: Most of the entries for the cash flow spreadsheet are self- explanatory.  Complete the spreadsheet using the suggestions for each entry. for example.  Next fill in the pre-start-up position of the essential operating data [non-cash flow information]. R. the cash flow part of the  column marked "Pre-start-up Position" should be completed. however.] Costs involved here are. the owner's cash injection. or an existing business undergoing  significant changes or alterations.C . and utilities deposits before the business is actually open. the following suggestions are offered to simplify the procedure:  Suggest even dollars be used rather than showing cents. rent.  If this is a new business. telephone. and cash from loans received before actual operations begin. alterations. Other items might be equipment purchases.S. where applicable.

“Cash Flow Analysis and the Fund Statements “which recommended that a fund statement covered by auditor’s opinion be included in companies financial reports. the AICPA issued ARS No. 2. According to paragraph 5 of Preface to Statement of 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)]. MUMBAI UNIVERSITY 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. “the term ‘financial statements’. statements of change in financial position. In 1961.S. income statement or profit and loss accounts. 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). an R. notes and other statements and explanatory materials which are identified as being part of financial statements” (IASC.C . “A complete set of financial statement normally includes a balance sheet. Covers balance sheets.

Liquidity and Financial Flexibility” which was issued for the following reason. which are not part of ordinary activities of the enterprise. Unusual items.C . a statements of change in financial position (which may be presented in a variety of ways. the term ‘ funds’ referred to cash. statements of change in financial position. 1982. 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. (Mosich and Larsen. 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. 935) In order to develop a conceptual framework for financial accounting and reporting the FASB issued in December 1980. 1992: p. MUMBAI UNIVERSITY income statements. R. p. and because no single definition has been established. As per paragraph 4 of the previous IAS 7 (October 1977). cash and cash equivalents or working capital (IFAC. should be separately disclosed (IASC: Para 21).S. 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”. a discussion memorandum” reporting Fund flow.813).

(2) Current practices regarding the reporting of funds flow information are not entirely satisfactory. The basis of such classification is derived from the financial theory. 95 ‘Statements of Cash Flow’ in 1987. Internal cash sources emanate from the net R. As a result of deliberation. (b) Classification of Fund flows: Fund flows are to be classified according to operating. MUMBAI UNIVERSITY (1) For assessing future cash flow.C . The statement must focuses on fund increase and decrease and must explain the change in cash plus cash equivalents. 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. FASB issued SFAS NO. 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. (a) Basis of Presentation.S. The major requirements of the statements are of the following two areas. 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. and receiving cash from the sale of equity shares to existing and new shareholders.S. Users of an enterprise’s financial statements are interested in how the enterprise generate and uses cash and cash equivalents. External cash sources come from financing activities such as borrowing. 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. MUMBAI UNIVERSITY cash generated from current operation and perhaps disinvesting and depletion of cash resources at start of the period.C . 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. This is the case regardless of the nature of the R. 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. investing and financing activities. Objective and Scope of IAS 7.

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












22 2009 936.74 2008 553.83 WITH THE HELP OF ABOVE BAR DIAGRAM WE CAN CONCLUDE THAT THE GROWTH OF NET PROFIT IS INCREASING EVERY YEAR. MUMBAI UNIVERSITY GROWTH IN THE NET PROFIT YEAR NET PROFIT (IN CR.04 2013 1371.69 2010 1030.51) 2007 818.) 2006 (84. R.C .S.45 2011 1133.59 2012 1247.


2011.C .  All current assets are growing with the growing rate of sales. MUMBAI UNIVERSITY ASSUMPTIONS 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.A.  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.S.  All current liability are also growing at the rate of company will get the assignments as per projection R. 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 .  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. 2013 because as per assumption to fulfill or to complete the project company wants machinery.  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.

 Debtor’s ratio is in the every year which is less than previous year.  It reports the effects on cash flows of a firm’s operating. So it is not good for the company.  Net profit ratio is in decline in first year. It shows creditors collection period is less than previous year. R. 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.  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. It is not good for the company.S.C . It shows stable condition of supply of the company. high is good for the company.  Creditors are decrease in first two years. investing and financing activities. MUMBAI UNIVERSITY OBSERVATION & FINDINGS  Cash flow statement cannot be equated with the income statement.

 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. If too little cash. then additional cash will have to be injected or cash paid out must be reduced.S. MUMBAI UNIVERSITY CONCLUSIONS  The cash position at the end of each year should be adequate to meet the cash requirements for the following year. If there is too much cash on hand. this money is not working for your business.C . Utilize the cash flow projection to assist in setting new goals and planning operations for more profit. It is important to follow through and complete the actual columns as the information becomes available. R.

 Investment for long term shall be done. So company should increase the creditors.  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.  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. R.S.  The company should reduce the capital expenditure.C .  The factory should try to maintain Cash Flow to the extent of optimum level. MUMBAI UNIVERSITY SUGGESTIONS  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. company should follow sound strategy so that the inventories and creditors are minimized and cash in hand is increased.  The factory should try to collect additional share capital from the share-holders and Repay the long-term secured and unsecured loan. debtors and creditors.

115.819.849.17 8.22 Add: Profit Brought Forward 1.06 1.788.163.51 818.030.99 1.52 6.797.19 7.22 Expenses for Earlier years Balance Profit -84.98 2.81 633.903.51 1. 1.969.29 Balance Profit Available for Appr.51 R.55 1.22 Provision for Taxation Current Taxation Fringe Benefit Tax Profit for the Year -84.81 8.66 30. (VPPL III) PROFIT & LOSS ACCOUNT Actual Sr.08 5.87 Depreciation/Amortisation 79.849.29 2.S.42 5.03 Expenses 15 564.402.26 7.28 Add: Depreciation written back Profit Before Taxation -84.08 Other Income 13 21.030.00 6.45 71.556.51 818.79 MUMBAI UNIVERSITY VARROC POLYMERS PVT.04 Net Sales 5.29 2.03 109. LTD.81 Interest 16 90.51 818.74 553.402.849.255.55 1.51 Balance Carried to Balance Sheet 1.718.55 1.01 568.924.74 553.12 63.758.45 7.962.74 553. Particulars SCH 2006 2007 2008 A Income: Sales Including Excise Duty 6.271.50 B Expenditure: Materials 14 5.425.402.165.02 1.C .12 Less: Excise Duty 759.55 1.07 16.849.57 5.97 6.170.

24 99.90 312.030.88 177. MUMBAI UNIVERSITY VARROC POLYMERS PVT.90 Cost 41.C .24 440.000. .00 980.43 Goods In Transit .51 Schedule: 3 Secured Loans: Term Loans: Cash Credit from Banks 318.402.000. (VPPL-III) SCHEDULES FORMING PART OF BALANCE SHEET Actual Sr.20 128.44 49.200.88 Schedule: 4 Unsecured Loans: 2.05 Work In Process 34. - Profit & Loss Account 1.030.849.47 3.72 156.88 318.00 1.00 980.84 Stores & Spares 19.849.200.51 1.36 263.76 3.29 31.402.51 198.37 Tools & Instruments 1. Particulars 2006 2007 2008 Schedule: 1 Share Capital: .17 50. Unquoted) Schedule: 7 Inventories: Raw Material 77.00 1.43 R. - Schedule: 2 Reserves & Surplus General Reserve Balance brought Forward .00 Schedule: 5 Schedule: 6 Investments (At Cost.76 20.15 Finished Goods 9.55 1.84 1.00 2.03 Packing Material 4.72 128. .10 Stock of Trading Items 9.29 2.31 0.47 2.52 2. LTD.98 41.29 2.55 1.

10 1.00 65.65 Loan Repaid 10.89 47.91 Total Over Six month 14. (VPPL-III) SCHEDULES FORMING PART OF BALANCE SHEET Actual Sr. Considered Good) 0.73 168.00 Sundry Creditors for Capital Goods 15.008.50 Interest Accrued but not due on Loans 9. MUMBAI UNIVERSITY VARROC POLYMERS PVT.24 Advances Tax & Tax Deducted at Source 22.48 46.28 47.S.17 0.18 55.32 76.00 Current Account 0.C .64 0. Particulars 2006 2007 2008 Schedule: 8 Sundry Debtors: (unsecured. 0.46 1.59 5.20 30.46 Schedule: 9 Cash & Bank Balances: Cash In Hand 45.71 Schedule: 11 Current Liabilities: Sundry Creditors for Supplies 600.05 R.77 100.75 49.563.24 4.17 5. Ltd.22 1.84 139.214.56 Fixed Deposits 10.00 952.23 Add: Considered Doubtful 14.18 Receivable from Varroc Eng.66 30.17 Interest Accrued on Fixed Deposits 0.30 Sundry Deposits 4. Pvt.681.21 1.48 Balance with Excise Department 17.080.77 733.21 8.200.60 1.80 35.61 5.23 Schedule: 10 Loans & Advdances: (unsecured.78 Interest Receivable 0.227.47 30.22 1.14 Less: Bad & Doubtful Debts 7.21 7.00 35.21 Expenses Payble 61.57 Other payble 55.24 4.23 1.12 1.213.90 58.91 Others 1.48 46.Considered Good) Advances Recoverable in Cash or kind or for Value to be received 37.40 0.00 22.00 76.09 91. LTD.

237.00 21.67 622.Gross (TDS Rs/-) . - Fixed Deposits With Banks 0.95 5.78 18.86 77.40 Miscellaneous Receipts 19.98 41.86 77.64 25.588.23 Net (C) 0.99 Less: Opening Stock-Finished Goods 9.00 C) Excise Duty on Finished Goods Opening Stock 1.97 1.07 16.76 Schedule: 13 Other Income: Intrest .00 -0.49 0.13 4.00 4.84 11.962.47 -Work in Process 97.05 (A) 4.25 0.95 5.05 5.130.97 1.02 Foreign Exchange Fluctuation .51 Closing Stocks 1.15 B) Increase/(Decrease) in Stocks Closing Stock . (VPPL-III) SCHEDULES FORMING PART OF BALANCE SHEET Schedule: 12 Provisions for: Leave Encashment 2.24 99.76 2.22 4.937.44 49.Working in Process 34.44 5.66 -24.98 Add: Purchases 4.51 106.02 6.40 9.566.00 5.42 Schedule: 14 Materials: A) Raw Materials Consumed Opening Stocks 106. LTD.20 52.925.24 0.984.78 5.04 5.163.03 Cost of Trading Items Sold 1.64 52.23 Profit on sale of Fixed Assests 0.60 -47.15 44.072.47 2.17 50.Gain 1.85 67.51 0.32 1.540.80 5.Finished Goods 9.097.20 Less: Closing Stocks 77.76 3. MUMBAI UNIVERSITY VARROC POLYMERS PVT.20 -1.48 96.34 5.666.159.48 Others 0.98 (B) -62.00 6.51 0.08 5.24 99.01 9.79 Excess Provision Written back 1.84 .66 30.C .03 R.24 99.76 3.S.51 0.19 5.

46 Freight 81.87 R.79 0.00 A) Machinery 7.01 Amount Written Off Against Lease Hold Land 0.96 5.51 41.88 -16.75 Repairs: 0.95 Insurance 5.03 5.53 4.55 9.39 Rates & Taxes 0.62 7.00 0.59 56.77 7.22 325.23 Salary.84 B) Building 2.08 4.65 37.25 Tools & Instruments 0.99 Labour Charges 274.48 2.C .66 0.83 Excise Duty Paid 0.55 35.17 3. Particulars 2006 2007 2008 Schedule: 15 Expenses: Stores & Spares Consumed 33.70 0.75 1.08 34.43 Contribution to Provident Fund 3.S.98 115.97 68.13 6. (VPPL-III) SCHEDULES FORMING PART OF BALANCE SHEET Sr.16 16.07 0.90 0.56 Staff Welfare 2.04 90.01 568.44 564.45 C) General 7.87 Others 0.06 0.91 Miscllaneous Expenses 27.99 109.99 71.19 25.28 Provision for Bad & Doubtful Debts 0.00 7.57 4.19 1.Wages & Bonus 56.90 0.04 0. MUMBAI UNIVERSITY VARROC POLYMERS PVT.72 5.49 Packing Material Consumed 27.81 633.96 64.00 0.00 Foreign Exchange Fluctuation .90 Rent 0.81 Schedule: 16 Interest On: Term Loans Bank Overdraft 89.72 0.05 0.98 115.24 Power & Water 28.Loss 2.64 1.64 27.81 295.43 Gratuty Provision & Contribution 0. LTD.00 0.24 32.

23 Sale of Fixed Assets 6.89 Wealth Tax Paid 55.09 (73.79) Net Cash used in Financing Activities (1001.61 358.22 Adjustment for: Add: Depreciation 63.23 Operating Profits before Working 1007.94) Cash Generated from Operations 1247.61) 240.73 0.28 Closing Cash & Bank balance on 31.00) (1001.73 0. 2006-2007 2007-2008 A Cash Flow from Operating Activities Net Profit before Tax & Earlier Expenses 818.98) (13.00 Less: Loan Repaid (12.23 R.00) 220.87 18.96 17.S.97 70.73 0.07 49.41) Less: Increase in Inventories 242.C .24 756.90 178.29) Increase in Debtors (18.74 553. - Interest Paid 109.24 (117.09 11.28 47.98 189.24 Less: Interest Received 0.90) Net Cash used in Investing Activities (73.65 Net Cash from Opereating Activities 1068. MUMBAI UNIVERSITY VARROC POLYMERS PVT.88) Increase in Unsecured Loans (1020.07 55.89 198.57 Lease Written Off 15.45 71.79) Net Cash & Cash Equivalants (A+B+C) (6.23 Capital Changes Add: Increase in Creditors 464.75 49.10 Less: Capital Expenditure 80.80 15.03. LTD.02 (312.98 115.(VPPLIII) CASH FLOW STATEMENT SR.13) 100.09) (79.23 6.90) C Cash Flow from Financing Activities Add: Increase in Term Loans Increase in Cash Credits 6.23 115.87 Income Tax Paid 13. ACTUAL PATICULARS NO.87 203.64 159.98) (79.37 31.64 B Net Cash from Investing Activities Add: Interest Received 0.00 (81.75 (397.23 0.04.13) (81.05) Opening Cash & Bank Balance on 01.80 Provision for Leave Encashments .29 Less: Interest Paid 109.48 (312.47) (A+B+C) (2. Web Resources: www. http://en. GHOSH (TAXMAN) • MANAGMENT ACCOUNTING FOR PROFIT CONTROL – KELLER & . • FINANCIAL MANAGEMENT BY KHAN & JAIN. MUMBAI UNIVERSITY BIBLOGRAPHY Books: • S.N. • FINANCIAL ACCOUNTING FOR MANAGERS – http://asbdc. MAHESHWARI (FINANCIAL MANAGEMENT) • COMPANIES ANNUAL REPORTS • COST AND MANAGEMENT ACCOUNT (ICWA-I STAGE) • FINANCIAL MANAGEMENT BY PRASANNA CHANDRA.htmhttp http://www.