ISSN: 2249-7196

IJMRR/May 2015/ Volume 5/Issue 5/Article No-4/315-320

Mangayarkkarasi Muthuvelan / International Journal of Management Research & Review

A STUDY ON CASH FLOW ANALYSIS IN M/S. PANTALOON RETAIL (INDIA)

LIMITED
Mangayarkkarasi Muthuvelan*1
1
Asst. Prof, Dept. of Electronics and Communication Engineering, Sri Muthukumaran
Institute of Technology, Mangadu, India.
ABSTRACT
Cash flow analysis is highly useful for financial planning in the firm. This analysis is used to
determine what transactions caused the cash balance to change during a particular period.
Many users give preference to direct method few only considering the indirect method. Here,
two statements are to be prepared one is calculation of cash from operations and another one
is cash flow statement. In this work the basic tool used to understand the cash flow analysis
of previous consecutive five year’s data collected from M/s. Pantaloon Retail (India) Limited.
The company involves retail operations in Fabric Materials, Food Materials, Electronic
Goods, Home Needs and Logistics. But all these operations are focused on retail markets in
India. The cash from business operations increases gradually from the year 2006-2010. Here,
the sources and applications of cash for the year 2010 is increased compared to other years.
So the financial position of the firm is good at the year 2010.
Keywords: Current assets, Current liabilities, cash inflow and cash outflow, sources of cash,
application of cash
1. INTRODUCTION
Cash flow is the changes in firm’s cash during a particular period by indicating the firm’s
sources and uses of cash during that period. To determine what transactions caused the cash
balance to change during a particular period [8].
Pantaloon Retail (India) Limited, is India’s leading retail company with presence across
multiple lines of businesses.
Cash flow as the actual movement of money in and out of a business. Money flowing into a
business is termed as positive cash flow and is credited as cash received. Monies paid out are
termed as negative cash flow and are debited to the business. The difference between the
positive and negative cash flows is termed as net cash flow [2].
The researchers have estimated cash received from customers and cash paid to suppliers and
employees for firms reporting using the indirect method for self-selection problem. This
method is based on adjusting income statement items for the movement in the relevant
balance sheet account(s). A much larger sample was obtained using this approach. Although
the results appear robust, the predictive power of the method using estimated data is lower

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 Mangayarkkarasi Muthuvelan / International Journal of Management Research & Review

than the method that uses the firm’s own reported direct cash flow data only. This process id
directly affected the distinct possibility of an errors-in-sample problem [7].
The need for financial plan is cash flow management. This would normally represent the
planned position throughout a work and as such would be concerned with the income,
expenditure and net cash flow. This enables the cash flow situation to be monitored using
approaches such as forecast, project phase monitoring/updating and monthly cost/value
reconciliation [1].
The ability of reveal operating cash flow and indirect accrual components can be used to
explain Australian firm’s annual returns. They found affirmation of significant explanatory
power for revealed operating cash flow components after aggregate operating cash flows.
This could be done when they also have significant incremental predictive power for future
(one year ahead) operating cash flows. Accrual components also have incremental
explanatory power for returns[2].
To disclose cash from operations using both the direct and indirect method, Australian data is
not subject to the limitations faced by United States data for cash flow requirements.
Components of CFO and reconciling items (non-cash items, non-operating items and changes
in accruals) can be taken directly from the financial statements instead of being estimated.
They examine the relevance of direct and indirect method disclosures is one of the few
Australian papers to take advantage of this data. They provide evidence supporting the
proposition that the cash flow components disclosed using the direct method are superior to
the net) CFO figure in explaining stock returns. Consistent with the United States research,
accrual information provided via the indirect method also adds explanatory power to their
model. In addition to cash flow and accrual information, the length of the firm’s operating
cycle (measured using current asset turnover ratios) was also found to be associated with
stock returns [4].
Most of the financial users give preference to the direct method, only few of them considered
the indirect method. Here, they found direct method cash flow this reflected in stock prices
indication. The direct method information is economically important that provides recurring
benefits than many firms which derives from providing direct method information likely
exceed recurring costs [6].
Success of every business depends on its cash management. The supply of cash is frequently
a limitation on the successful execution of many policies and programs. So it is necessary to
study the composition of cash of a firm to know the impact of its cash flow decision on its
liquidity, profitability and solvency [3].
A firm would enter into trouble when it spends more cash than it’s able to generate. The
adequate capital for it survival was generated by the firm. To know the firm is generating
adequate cash we can look into the cash flow statement, cannot look into the balance sheet or
the profit and loss account.
The cash flow enables the effective planning and coordination of financial operations. This
also enables the proper allocation of cash among the various activities of the firm. The
investment decisions of the management is aided by only the cash flow. The firm must

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 Mangayarkkarasi Muthuvelan / International Journal of Management Research & Review

properly analyzing the past business activities and plan for the future. The liquidity picture of
the firm is shown by the cash flow of the firm.
In this paper cash from operation and cash flow statement was calculated. The data taken to
this analysis for the period 2005-2010 from the annual report of Pantaloon Retail (India) Ltd
[9].
This paper is organized as follows: Section 2 describes the cash flow management
approaches. In Section 3, Data analysis and Interpretation was analyzed. The Section 4
concludes the paper.
2. CASH FLOW MANAGEMENT APPROACHES
A cash flow statement is the part of a financial statements prepared by the firm. The cash
flow can be classified as Operating activities, investing activities and Financing activities.
This classification is essential to analyze the cash flow [8].
1. Operating Activities
This involves manufacturing and selling of goods and services. The cash inflow find out from
the sale and the cash outflow from the payment of all expenses relating to selling the product.
This activity can be described as the cash flow from operations is the difference between the
cash inflow and outflow from operations.
2. Investing Activities
The cash flows related to the purchase and sale of fixed assets, buying and selling of financial
securities, borrowing and lending money. The cash flow from investing activities are the
difference between cash inflow and outflow from investing activities.
3. Financing Activities
Here, the cash inflow is the raising of capital either as debt or as equity and cash outflow is
the payment of dividend. This can be described as the difference between cash inflow and
outflow from financing activities.
From these three activities we are going to use only operating activities. For this we can
calculate the cash from operations and cash flow statement.
A. Changes of balance sheet in terms impact on cash
Table 1: Flow of Cash
Outflow of Cash Inflow of Cash
Increase in current asset other than cash Decrease in current asset other than cash
Increase in non-current assets Decrease in non-current assets
Decrease in current liabilities Increase in current liabilities
Decrease in long term liabilities Increase in long term liabilities
The above table 1 shows the inflow and outflow of cash of any firm’s. The inflow of cash
denotes the decrease in current and non - current assets, increase in current and long term
liabilities. The outflow of cash denotes the increase in current and non - current assets and
decrease in current and long term liabilities.

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 Mangayarkkarasi Muthuvelan / International Journal of Management Research & Review

B. Sources and applications of cash

Table 2: Sources and Applications of Cash
Sources of Cash Applications of Cash
Issue of shares Redemption (Repayment) of capital
Issue of long term debts such as debentures Purchase of fixed assets
Sale of assets Repayment of long term debt
Cash Cash lost in operations
Decrease in current assets Increase in current assets
Increase in current liabilities Decrease in current liabilities
The sources and applications of cash of a firm is shown in table 2.
C. Statements to be prepared
i. Calculation of cash from operations
It covers fund from operations and also covers the changes in current assets (except cash and
bank balances) and current liabilities. This clubs both the statements of changes in working
capital and calculations of funds from operations.
Here are the steps for calculating the cash flow from operations using the indirect method:
1. Begins with net income.
2. Add back non-cash expenses. (Such as depreciation and
amortization)
3. Adjust for gains and losses on sales on assets. Add back
losses Subtract out gains
4. Account for changes in all non-cash current assets.
5. Account for changes in all current assets and liabilities
except notes payable and dividends payable.
ii. Preparation of cash flow statement
This statement prepared by considering the various changes in the fixed assets and long term
liabilities. This is starts with the opening balance of cash/bank (if positive, on the debit side
and if negative, on the credit side) and ends with the closing balance of cash/bank [8].
3. DATA ANALYSIS AND INTERPRETATION
The research made in this study is analytical research. Analytical research involves analysis
of information to make critical evaluation. It identifies variables and tries to make
relationship between them.
This study covers a period of five years from 2005-2006 to 2009-2010.
This study is purely based on secondary data. The secondary data have been collected from
the published annual reports of the company from 2005-2006 to 2009-2010.The annual
reports were obtained directly from the company website.

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 Mangayarkkarasi Muthuvelan / International Journal of Management Research & Review

Here, we find out the cash from operations and cash flow statement.
A. Calculation of cash from operations
Table 3: Cash From Operations
Particulars June- June- June- June- June-
2006 2007 2008 2009 2010
Net profit/loss as per the 1960.86 3393.86 5295.88 6661.42 6316.66
profit and loss account (A)
Add: 77.4 129.33 253.98 447.74 456.77
1. Depreciation
2. Decrease in current asset - - - - 1917.80
3. Increase in current - 359.58 637.66 911.86 -
liabilities
(B) 77.4 488.91 891.64 1359.6 2374.57
C=A+B 2038.26 3882.38 6187.52 8021.02 8691.23
Less: - 1749.45 2628.58 3282.74 -
1. Increase in current asset
2. Increase in current
liabilities - - - - 887.63
(D) - 1749.45 2628.58 3282.74 887.63
Cash from business
operations (E=C-D) 2038.26 2132.93 3558.94 4738.28 7803.6
Here, the cash from business operations gradually increases. At the year 2010 the firm has a
good financial position compared to previous years.
B. Cash flow statement
Table 4: Sources of Cash
Sources of cash June June June June June 2010
2006 2007 2008 2009
Balance in the
Beginning: 21.77 162.97 121.10 109.34 100.54
Cash in hand
Cash in Bank
Add:
Decrease in - 790.74 601.05 379.96 1340.71
working capital
21.77 953.71 722.15 489.3 1441.25
Table 5: Applications of Cash
Applications of cash June June June June June
2006 2007 2008 2009 2010
Payment on dividends 6.72 7.54 10.67 11.57 17.13
Payment of long term loans 297.57 633.85 962.32 1202.56 421.68
Increase in working capital 790.74 601.05 379.96 - 130.71
1095.03 1242.44 1352.95 1214.13 1779.52
Here, the sources of cash for the year 2007 is increased compared to other years except 2010.
The sources of cash for the year 2010 is most superior to other years. For the year 2006 is

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 Mangayarkkarasi Muthuvelan / International Journal of Management Research & Review

least poor compared to other years. The applications of cash for the year 2010 is most
superior compared to other years. At the year 2006 the cash is little poor compared to other
years. From this we can say the sources and applications of cash for the year 2010 is
increased compared to other years. These are shown in Table IV and V. So we conclude the
firm has a good financial position at this year.
4. CONCLUSION
This paper has attempted to look into cash flow analysis in Pantaloon Retail (India) Limited.
The paper focuses on the statement of cash flows that recasts the financial statement data
provided by the accrual process. It discusses the use and analysis of the information provided
by the cash flow statement. Many users give preference to direct method few only
considering the indirect method. In this paper I find out the cash from operations and cash
flow statement for the financial years 2006-2010. At the year 2010 the cash from operations
gradually increases compared to other years. The sources of cash for the year 2010 is most
superior to others. At the year 2006 the Applications of cash is little poor than other years.
For the year 2010 the Applications of cash is very high. So we can conclude at the 2010 the
firm has good financial position.
Acknowledgement: The authors would like to thank the anonymous reviewers for their
careful revision and important suggestions which significantly helped to improve the
presentation of this paper.
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[3] Sidhu B, Clinch G, Sin S. The usefulness of direct and indirect cash flow disclosures.
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[4] Bhavsinh M, Dodiya. A Comparative Study on Cash Flow Statements of ICICI Bank
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[9] www.pantaloonretail.in

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