THE IMPACT OF CASH FLOW STATEMENT ON THE

COMPANY’S PERFORMANCE
(WITH SPECIFIC REFERENCE TO SELECT AUTOMOBILE COMPANIES IN INDIA)

Introduction:
By studying cash flow statements, one can come to know about the capacity of the
organizations to generate cash and cash equivalents. It helps the users in comparing the present
value of the future cash flows of the different organizations. It removes the effects of using
different accounting treatments for the repeated transactions and events. In this way, it
improves the comparison of the various enterprises reporting about operating performance. To
know about the amount, timing and surety of future cash flows, historical information about
cash flow is used. It is also helpful in checking the correctness of the past judgments of future
cash flows. It also helps in determining the relationship between cash flow and profitability
and the effect of inflation.
Cash flow statements are provided with the other financial statements in the annual reports of
the companies. The information provided in these statements helps the users:
 To find out the changes in net assets of an organization
 To find out the changes in the financial structure of an organization
 To find out the liquidity and solvency position of an organization
 To know about the ability of an organization to make changes in time if the
circumstances and opportunities are changing.

Industry Profile
Automobile industry, the business of producing and selling self-powered vehicles,
including passenger cars, trucks, farm equipment, and other commercial vehicles. By allowing
consumers to commute long distances for work, shopping, and entertainment, the auto industry
has encouraged the development of an extensive road system, made possible the growth of
suburbs and shopping centres around major cities, and played a key role in the growth of
ancillary industries, such as the oil and travel businesses. The auto industry has become one of
the largest purchasers of many key industrial products, such as steel. The large number of
people the industry employs has made it a key determinant of economic growth.
The history of the automobile actually began about 4,000 years ago when the first wheel
was used for transportation in India. The automobile history begins as early as 1769, with the
creation of steam engine automobiles capable of human transport. In 1806, the first car powered
by an internal combustion engine running on fuel gas appeared, which led to the introduction
in 1885 of the ubiquitous modern gasoline or petrol fueled internal combustion engine. Cars
powered by electric power briefly appeared at the turn of the 20th century. But largely
disappeared from use until the turn of the 21st century. The automobile history can be divided
into number of eras, based on the prevalent method of automotive propulsion during that time.

Company Profile
Ashok Leyland
Ashok Leyland, flagship of the Hinduja group, is the 2nd largest manufacturer of
commercial vehicles in India, the 4th largest manufacturer of buses in the world, and the 12th
largest manufacturers of trucks.
Headquartered in Chennai, 9 manufacturing plants gives an international footprint - 7
in India, a bus manufacturing facility in Ras Al Khaimah (UAE), one at Leeds, United
Kingdom and a joint venture with the Al teams Group for the manufacture of high-press die-
casting extruded aluminium components for the automotive and telecommunications sectors,
Ashok Leyland has a well-diversified portfolio across the automobile industry. Ashok Leyland
has recently been ranked as 38th best brand in India.

Bajaj Auto
The Bajaj Group is amongst the top 10 business houses in India. Its footprint stretches
over a wide range of industries, spanning automobiles (two wheelers manufacturer and three
wheelers manufacturer), home appliances, lighting, iron and steel, insurance, travel and
finance. The group's flagship company, Bajaj Auto, is ranked as the world's fourth largest three
and two wheeler manufacturer and the Bajaj brand is well-known across several countries in
Latin America, Africa, Middle East, South and South East Asia. Founded in 1926, at the height
of India's movement for independence from the British, the group has an illustrious history.

Review of literature

Research Methodology
Research Design
The study aims at analysing the cash flows of select companies. As the study describes
the existing facts and figures given in the financial statements and the cash flows movements
of the select companies of the automobile industry. Therefore, the research design followed is
analytical in nature.
Research Problem
The purpose of the study is to investigate the Cash flow statement of the select
companies. Part of the study will also ascertain whether cash Management practices are being
performed, what are the challenges faced? Many companies face liquidity problems and
eventually fail due to the lack of Cash Management knowledge and implementation.
Objectives of the study
The main objective of the study is to examine the impact of Cash flow statement on
Company’s performance of select automobile companies in India.
 To study the effect of the Operational activities on performance of the select companies.
 To study the effect of the Investing activities on performance of the select companies.
 To study the effect of the Financing activities on performance of the select companies.

Hypotheses
H₀₁: Operating activities do not have a significant effect on Company’s profitability.
H₁₁: Operating activities have a significant effect on Company’s profitability.
H₀₂: Investing activities do not have a significant effect on Company’s profitability.
H₁₂: Investing activities have a significant effect on Company’s profitability.
H₀₃: Financing activities do not have a significant effect on Company’s profitability.
H₁₃: Financing activities have a significant effect on Company’s profitability.

Need for the study

This study is significant in the context of the possible users of the information availed
by it. Various entities will find relevance in the results of the study and therefore, find it useful
in decision-making. The study will be able to demonstrate the relationship between cash flow
and profitability enabling companies to project their future cash flow needs and plan for
investment and expansion of companies or take mitigating measures in the event that they
foresee a situation of diminishing cash flow, hence, it will aid in decision-making.
Scope of the study
The study is willing to consider a time period of five years. The scope is limited to only
Cash Flow statement analysis of the select companies in the Automobile Industry.
Sources of data
The study is purely based on secondary data obtained from the following sources:
 Published Annual reports of the respective companies.
 Websites of the respective companies.
Tools and techniques
 Descriptive Statistics
 Regression Analysis
Limitations
 The entire study is limited to 5 companies only.
 The study is based on secondary data and has its own limitation like the window
dressing.
 The study is confined to a period of 5 years.