Cash Flow Statement Analysis S

CASH FLOW STATEMENT ANALYSIS PARAGON FINANCE LTD
CHAPTER-1
1.1 INTRODUCTION
1.2 INDUSTRY PROFILE
1.3 COMPANY PROFILE
SREE VIDYANIKETHAN INSTITUTE OF MANAGEMENT Page 1

INTRODUCTION TO TOPIC:
In financial accounting, a cash flow statement, also known as statement of cash flows, is
a financial statement that shows how changes in balance sheet accounts and income affect cash
and cash equivalents, and breaks the analysis down to operating, investing, and financing
activities.
A cash flow statement is a financial statement that summarizes the amount of cash and
cash equivalents entering and leaving a company. The cash flow statement measures how well
a company manages its cash position, meaning how well the company generates cash to pay its
debt obligations and fund its operating expenses.
What Is a Cash Flow Statement?

A cash flow statement is a financial statement that provides aggregate data regarding all cash
inflows a company receives from its ongoing operations and external investment sources. It also
includes all cash outflows that pay for business activities and investments during a given period.
A company's financial statements offer investors and analysts a portrait of all the transactions
that go through the business, where every transaction contributes to its success. The cash flow
statement is believed to be the most intuitive of all the financial statements because it follows the
cash made by the business in three main ways—through operations, investment, and financing.
The sum of these three segments is called net cash flow.
These three different sections of the cash flow statement can help investors determine the value
of a company's stock or the company as a whole.
Key Takeaways
 A cash flow statement provides data regarding all cash inflows a company receives from
its ongoing operations and external investment sources.
 The cash flow statement includes cash made by the business through operations,
investment, and financing—the sum of which is called net cash flow.
 The first section of the cash flow statement is cash flow from operations, which
includes transactions from all operational business activities.
 Cash flow from investment is the second section of the cash flow statement, and is the
result of investment gains and losses.
 Cash flow from financing is the final section, which provides an overview of cash used
from debt and equity.

How Cash Flow Statements Work

Every company that sells and offers its stock to the public must file financial reports and
statements with the Securities and Exchange Commission (SEC). 1.The three main financial
statements are the balance sheet and income statement. The cash flow statement is an important
document that helps open a wind interested party’s insight into all the transactions that go
through a company.
There are two different branches of accounting—accrual and cash. Most public companies use
accrual accounting, which means the income statement is not the same as the company's cash
position. The cash flow statement, though, is focused on cash accounting.
Profitable companies can fail to adequately manage cash flow, which is why the cash flow
statement is a critical tool for companies, analysts, and investors. The cash flow statement is
broken down into three different business activities: operations, investing, and financing.
Let's consider a company that sells a product and extends credit for the sale to its customer. Even
though it recognizes that sale as revenue, the company may not receive cash until a later date.
The company earns a profit on the income statement and pays income taxes on it, but the
business may bring in more or less cash than the sales or income figures.
Cash Flows from Operations

This is the first section of the cash flow statement covers cash flows from operating activities
(CFO) and includes transactions from all operational business activities. The cash flows from
operations section begins with net income, then reconciles all noncash items to cash items
involving operational activities. So, in other words, it is the company's net income, but in a cash
version.
This section reports cash flows and outflows that stem directly from a company's main business
activities. These activities may include buying and selling inventory and supplies, along with
paying its employees their salaries. Any other forms of in and outflows such as investments,
debts, and dividends are not included.
Companies are able to generate sufficient positive cash flow for operational growth. If there is
not enough generated, they may need to secure financing for external growth in order to expand.
For example, accounts receivable is a noncash account. If accounts receivable go up during a

period, it means sales are up, but no cash was received at the time of sale. The cash flow
statement deducts receivables from net income because it is not cash. The cash flows from the

operations section can also include accounts payable, depreciation, amortization, and numerous

prepaid items booked as revenue or expenses, but with no associated cash flow.
Cash Flows from Investing

This is the second section of the cash flow statement looks at cash flows from investing (CFI)
and is the result of investment gains and losses. This section also includes cash spent on
property, plant, and equipment. This section is where analysts look to find changes in capital
expenditures (capex).
When capex increases, it generally means there is a reduction in cash flow. But that's not always
a bad thing, as it may indicate that a company is making investment into its future operations.
Companies with high capex tend to be those that are growing.
While positive cash flows within this section can be considered good, investors would prefer
companies that generate cash flow from business operations—not through investing and
financing activities. Companies can generate cash flow within this section by selling equipment
or property.
Cash Flows from Financing

Cash flows from financing (CFF) is the last section of the cash flow statement. The section
provides an overview of cash used in business financing. It measures cash flow between a
company and its owners and its creditors, and its source is normally from debt or equity. These
figures are generally reported annually on a company's 10-K report to shareholders.
Analysts use the cash flows from financing section to determine how much money the company
has paid out via dividends or share buybacks. It is also useful to help determine how a company
raises cash for operational growth.
Cash obtained or paid back from capital fundraising efforts, such as equity or debt, is listed here,
as are loans taken out or paid back.
When the cash flow from financing is a positive number, it means there is more money coming
into the company than flowing out. When the number is negative, it may mean the company is
paying off debt, or is making dividend payments and/or stock buybacks.

Introduction to financial management:
Financial Management:
In the earlier years of its evaluation it was created rising of funds. In the current year literal
pertaining to management a border scope. So as to include in additional to procurement of funds
efficient of funds efficient financial resources in universally reorganized. The term nature as
applied to financial management refers to its relationship with the closely related fields of
economics and accounting its functions, scope.
Definitions:
“Financial management is considered with the efficient use of an important economic
resource namely capital funds.” ------- Solomen
“Financial management is the application of planning and control function to the finance
functions.”--------- Howard and Upon.
Finance Functions:
It may be difficult to separate finance functions from production, marketing and other
functions, but the functions themselves can be readily identified. The functions of rising funds,
investing them in assets and distributing returns earned to share holders respectively known as
financing decision, investing decision, and dividend decision. A firm attempts to balance cash
inflows and outflows while performing these functions .This is called liquidity decision, and we
may add it to the list of important finance decisions or functions. Thus finance functions include:
1. Long term asset mix (investment decisions)
2. Capital mix (financing decisions)
3. Profit distribution (dividend decisions)
4. Short term asset mix (liquidity decisions)

Scope of Finance:
Firm create manufacturing capacities for production of goods some provide service to
customers. They sell their goods or services to earn profit. They raise funds to acquire
manufacturing and other facilities. Thus the three most important activities of business firm are:
 Production
 Marketing
 Finance
A firm as whatever capital it needs and employees in (finance activities) its activities
which generates returns on invested capital (production and marketing services).
So financial management helps to the firms to take the correct decisions. And also helpful
to firms o know how to utilize the economic resources likely capital fund in the proper way. It is
also controlling tool to control the financial functions of the firm. So it is very important in every
organization.
Meaning and Types of Financial Statements:

A financial statement is an organized collection of data according to logical and
consistent accounting procedures. Its purpose is to convey in understanding of some financial
aspects of a business firm.
Thus, the term ̳financial statements generally refer to two basic statements.
1. Income statement (Profit or loss account) &
2. Balance sheet.
Income Statement:
The income statement may be prepared in the manufacturing account to find out
the cost of production, in the form of trading account to determine the gross loss in the form of
profit &loss account to determine the net profit or loss.
If the profit is increasing year after year or it is higher than the other competitors,
it means the business is a profitable one. Otherwise it is better to switch over to other or close
down. Similarly if the expenditure is more than the income then there will be no loss. It means
that the firm is losing its capital.
Balance Sheet:
The balance sheet is one of the important statements which show the financial
position of the firm, measured in terms of assets& liabilities. i.e., balance sheets show all the
assets owned by the firm on one hand and on the other side owner‘s funds and liabilities. The
difference between total assets and external liabilities is known as “Owners’ equity.”
If the owner‘s equity is in increasing over a period of time, it means the firm is in
the position of financial insolvency.
Nature of Financial Statement:

Financial statements are prepared for the purpose of presenting a periodical
review are report by the management and deal with the state of investment in business and result
achieved during the period under review.
From this it is clear that financial statements are affected by three things:
1. Recording of facts.
2. Accounting conventions.
3. Personal judgment.
TECHNIQUES (TOOLS) FOR ANALYSIS AND INTERPRETATION:
The following can be used in connection with analysis interpretation of financial

statements:
1. Comparative financial statements.
2. Common measurement statements.
3. Trend percentage analysis.
4. Fund flow statement.
5. Net working capital analysis.
6. Cash flow statement.
7. Ratio analysis
INDUSTRY PROFILE
1. AUTOMOBILE FINANCE
Indian auto market has more than 35 financers that offer auto financing
solutions to the intended car buyers. Being one of the fastest growing automobile markets in the
world, the Indian automobile market has got so much of potential and hence a number of auto
finance companies have come up to tap the booming market. It can be added here that the
passenger vehicle market constitutes almost 80% of automobile sales. In 2008, the stock
passenger car was about 11 per 1,000 people. The production of passenger vehicle is further
expected to go up at a CAGR of about 10% from 2009-10 to 2012-13. So, sensing this market
potential, many financial companies in India have given special attention on auto financing.
During the 2000s, the auto finance in India was dominated by private
banks, when Citibank was the market leader. But its market share dropped from 27 per cent
during 90s to less than 8 percent during early 2000. ICICI Bank became the new leader with
almost 29.2 per cent market share during 2003-04. The journey continued till 2008 when HDFC
bank took the lead. However, the current trend shows that the PSU banks like SBI, PNB, Bank of
Baroda, Bank of India, Canara Bank, Syndicate Bank and Union Bank etc. are leaving behind
their private sector counterparts in the ` 22,000 crores passenger car and 2-wheeler loan market.
The reason behind this is the fact that, private banks have been compelled to reduce their
exposure to the sector owing to increased delinquencies.
The post 1990s brought about a paradigm shift in the scenario of Indian financial market. The
economic renaissance brought by liberation of Indian economy had a stupendous effect on
Indian economy. The Indian financial market was previously insulated from foreign investor.

Modern and liberal economic policies facilitated large foreign direct investments / FDI inflow
to the Indian market. The rise in business activities and its subsequent rise in financial activities
led to the need of financiers in India. India Finance Company offers the following types of
products to its customers with easy repayment facilities, like -
Personal Loan - Loan without any guarantee or security from ` 0.50 lac to ` 25 Lac. The
Loan is given on the basis of Financials such as ITR, Salary Slip or Form 16 or on the
basis of track record as running or completed EMIs for loan as home, personal or vehicle.
Home Loan - Home Loan, ` 5 lac to ` 10 lac for Salaried / Businessman. The loan can be
taken to buy, renovate or construct a house or an apartment. The loan eligibility is
calculated by seven different methods such as Income, Track Basis, Banking, Liquid
Income, Credit Card or Life Insurance etc.
Car Loan - Loans up to 90% of the car value & 100% in some cases are offered. Car
Loans are offered for old or used cars or for purchase of new cars. Loan amount is
calculated on the basis of one's repaying capacity.
Cash Credit - A secured working capital loan, offered on the basis of turnover and
debtors and creditors and stock in hand, security of property required.
Consumer Loan - Consumer Loans are offered for purchase of consumer durable items
viz. TV, Refrigerator, Washing machine, Air conditioner & other home appliances at
reasonable rates.
Loan Against Property - Loan Against Property on commercial or residential are

offered at competitive rates.
Loan Against Rent Income - Loans Up to 90% of discounted value of future rent
receivable are offered.
Business Loan - Business Loans are available for Manufacturer, Trader, School, Trust,
College, Institution and Other Businesses. This loan can be availed without any guarantee
or security. The loan eligibility is calculated on the basis of Profit and Loss account and
IT Returns.
Loan against Securities - Loans up to 90% of the Security value is offered. Loans are
available against fixed deposit receipt, National Saving Certificate (NSC), Kisan Vikas
Patra (KVP), Government Bonds, Debentures etc.
Loan against Shares - Loan against Shares up to 60% of the present value are offered.
Loan amount is calculated on the basis of the valuation of share in the market.
2. SHARES:

If you aspire to invest in stocks of Indian companies, you have to do it via stock
exchanges like NSE and BSE. However, it’s not possible for a common man to buy stocks
directly through the stock exchanges.
Hence, they require a middle man to enforce the trade; and these middlemen are known as stock
brokers. The function of a stockbroker is to promote the buying and selling of stocks at the stock
markets, on behalf of investors.
But if you are an occasional trader or investor who is not accomplishing more than 3-4
transactions monthly, then you should opt for a full-service broker.
A full-Service Broker is also called a Traditional Broker. This section of brokers provides
assistance to their clients for any sort of investment. Here is a list of some of the assistance given
by Full-Service Brokers:
1. Offline or branch Presence.

2. Advisor, Research, and Stock Tips.
3. Devoted dealer or Relationship Manager.
4. 24X7 Support to customers.
5. Training sessions for the clients.
6. Facilities of Margin Funding.
7. Diversity in financial products.
When raw investors go on to take assistance from brokers, they often get confused with
questions like Which stockbroker will be best suited for them? Which will be the most reliable
one? Who has less brokerage? etc.
3. REAL ESTATE:

Introduction
Real estate sector is one of the most globally recognized sectors. It comprises of four sub sectors
- housing, retail, hospitality, and commercial. The growth of this sector is well complemented by
the growth in the corporate environment and the demand for office space as well as urban and
semi-urban accommodations. The construction industry ranks third among the 14 major sectors
in terms of direct, indirect and induced effects in all sectors of the economy.
It is also expected that this sector will incur more non-resident Indian (NRI) investment, both in
the short term and the long term. Bengaluru is expected to be the most favoured property
investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and
Dehradun.
Market Size
By 2040, real estate market will grow to Rs. 65,000 crore (US$ 9.30 billion) from Rs. 12,000
crore (US$ 1.72 billion) in 2019. Real estate sector in India is expected to reach a market size of
US$ 1 trillion by 2030 from US$ 120 billion in 2017 and contribute 13% to the country’s GDP
by 2025. Retail, hospitality, and commercial real estate are also growing significantly, providing
the much-needed infrastructure for India's growing needs. Indian real estate increased by 19.5%
CAGR from 2017 to 2028.
Office space has been driven mostly by growth in ITeS/IT, BFSI, consulting and manufacturing
sectors. During 2019, the office leasing space reached 60.6 msf across eight major cities,
registering a growth of 27% y-o-y. In 2019, office sector demand with commercial leasing
activity reached 69.4 msf. Co-working space across top seven cities increased to reach 12 sq ft
by end of 2019.
Warehousing space is expected to reach 247 msf in 2020 and see investment worth Rs. 50,000
crore (US$ 7.76 billion) during 2018-20. Grade-A office space absorption is expected to cross
700 msf by 2022, with Delhi-NCR contributing the most to this demand.
Housing sales reached 2.61 lakh units in 2019 across seven major cities. Home sales volume
across eight major cities in India jumped by 2.5x to 33,403 units from July 2020 to September
2020, compared with 9,632 units in the previous quarter, signifying healthy recovery post the
strict lockdown imposed in the second quarter due to the spread of COVID-19 in the country.
Investments/Developments
Indian real estate sector has witnessed high growth in the recent times with rise in demand for
office as well as residential spaces. Real estate attracted around Rs. 43,780 crore (US$ 6.26
billion) in investment in 2019. The retail segment attracted PE (Private Equity) investment of
around US$ 1 billion in 2019. Institutional investment in the sector stood at US$ 712 million
during the quarter ended March 2020. Real estate attracted around US$ 14 billion from foreign
PE between 2015 and Q32019.

Exports from SEZs reached Rs. 7.96 lakh crore (US$ 113.0 billion) in FY20 and grew ~13.6%
from Rs. 7.1 lakh crore (US$ 100.3 billion) in FY19.
Government Initiatives
Government of India along with the governments of respective States has taken several
initiatives to encourage development in the sector. The Smart City Project, with a plan to build
100 smart cities, is a prime opportunity for real estate companies. Below are some of the other
major Government initiatives:
 In October 2020, the Ministry of Housing and Urban Affairs (MoHUA) launched an
affordable rental housing complex portal.
 On October 27, 2020, the government announced the application of Real Estate
(Regulation & Development) Act, 2016 in the union territory of Jammu & Kashmir. This
has paved the way for any Indian citizen to buy non-agricultural land and property, as
opposed to the eligibility of only local residents earlier.
 In order to revive around 1,600 stalled housing projects across top cities in the country,
the Union Cabinet has approved the setting up of Rs. 25,000 crore (US$ 3.58 billion)
alternative investment fund (AIF).
 Under Pradhan Mantri Awas Yojana (Urban) (PMAY (U)), 1.12 crore houses have been
sanctioned in urban areas, creating 1.20 crore jobs.
 Government has created an Affordable Housing Fund (AHF) in the National Housing
Bank (NHB) with an initial corpus of Rs. 10,000 crore (US$ 1.43 billion) using priority
sector lending short fall of banks/financial institutions for micro financing of the HFCs.
 On July 31, 2020, India formally approved 423 SEZs, of which 248 were already in
operation. Most special economic zones (SEZs) are in the IT/ BPM sector.
Road Ahead
The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate
Investment Trust (REIT) platform, which will allow all kind of investors to invest in the Indian
real estate market. It would create an opportunity worth Rs. 1.25 trillion (US$ 19.65 billion) in
the Indian market in the coming years. Responding to an increasingly well-informed consumer
base and bearing in mind the aspect of globalisation, Indian real estate developers have shifted
gears and accepted fresh challenges. The most marked change has been the shift from family
owned businesses to that of professionally managed ones. Real estate developers, in meeting the
growing need for managing multiple projects across cities, are also investing in centralised
processes to source material and organise manpower and hiring qualified professionals in areas
like project management, architecture and engineering.


COMPANY PROFILE
HISTORY:
Paragon Finance Ltd stepped into the finance market on the 21st Day of July, 1986, by the
initiative of Late Shri Radhey Shyam Gupta at Kolkata with Mr. Aloke Gupta and Mr. Manoj
Gupta as the First Directors. Paragon Finance Ltd is a NBFC registered with the Reserve Bank of
India as a Non Deposit taking NBFC. All the members of the company imbibe in them the core
values of Paragon, which has helped us in the past and continues to help us remain what our
name embodies- the Paragon of financial excellence.
Initially formed as “PARAGON FINANCE AND PLYWOOD INDUSTRIES LTD”, the

company changed its name to “PARAGON FINANCE LTD” on the 16th Day of August, 1993
and till date is continuing with the same name. The Company came out with its Public Issue in
the year 1995. Since then the Company is listed on the Bombay Stock Exchange having a paid-
up Share Capital of Rs. 425 Lacks.
Paragon Finance Ltd is playing a vital role in providing aid to the unemployed mass through easy
and lucrative finance facility at easy on the pocket cost. Un cumbersome procedure with least
formalities on the documentation part attract those who find it tough to get finance from the
conventional modes of banks & other financial institutions. Thus we are providing employment
to our citizens through economic aid via monthly installments for financing small and big
commercial vehicles that gives earning in the hands of unemployed families. We have our reach
at cities as well as outskirts of Jharkhand, Bihar, & West Bengal that helps to enhance our
customer base over wide area. The business model of Paragon has evolved in such a manner that
the company has some of the lowest default rates in the industry, not to mention a huge IRR of
24% from its core activities. This alone makes Paragon a much studied entity and perhaps
explains the steady and stoical movement of it earning graphs, which seems unaffected by
external factors.
We are deeply concerned about the poverty and economic starvation that we see around us. Like
the visionary we understand the fact that the way out was not through doles, but through
financial empowerment and with the life view, we started Paragon Finance, an entity dedicated
providing finance to those on whom the doors of convectional credit was shut so that they too
could join the economic mainstream. Today, many decades on, the dream has taken concrete
shape and Paragon Finance Ltd is a unique entity which continues to instill the light of self
reliance in the eyes of business associates. “We have given more than 50000 vehicles to those
outside the blanket of conventional credit, thereby ensuring the survival of more than 250000
people directly.
Paragon Finance Ltd has remain unperturbed and has continued to grow, as greed is not our
driving force, viewing ourselves as facilitators in the process of financial empowerment of those
in need. We do not view ourselves as mere financers of commercial vehicles, but rather we are a

part of family that owns and operates a commercial vehicle. Thus in extreme cases where our
loans go bad, we not only know the reasons, but also have the rectifying medicines ready
converting a threat into an opportunity.
Vision & Mission Statement

The journey of a thousand miles begins with the first step. We are here for good and we are here
to make perfection our crowning glory. We are neither money magicians, not charlatans
promising the elixir of financial prosperity. We have however made it our business to continue
winning - with the steady dexterity of a seasoned campaigner.
Vision:
To be a globally available organization offering sustainable solutions in asset and real estate
finance.
Mission:
To provide the funds to eligible entities and providing assets at mutually beneficial terms so as to
maximize the profit for its investors and owners and satisfaction to the customers and good
working environment for the associates and colleagues.

Values:
• Timely services.
• Keeping the commitment.
• Be fair and ethical.
• Strive for excellence
Paragon Finance is one such entity, quietly adding value. Single minded in its devotion to the the
Goddess of Wealth. A company that believes in letting its figures speaks for itself. It has been
through the motions - of stock market upheavals, of black Mondays and crashes to bottomless
pits and has been a quiet spectator - of not only those that shouted the shrillest, but also those that
have littered the way, beating it’s on, well trodden, risk averse path to success. If you want to put
it that way, yes! We are an old fashioned company doing business the traditional way. Our
philosophy is simple - we believe in our self, take pride in our work, zealously guard our
reputation, honor our commitments and love every moment. We do not crave for the moon - we
are happy with the small stars that dot our horizon.
Areas of service:
Paragon Finance Limited is an Automobile Finance, Real Estate Projects
Development, Construction & Planner, Investment Company. The world of finance - be that in
the micro level providing seed money to entrepreneurs or the top end comprising of the high
flyers with mind boggling resources at stake - is one of the most exciting fields to operate in. On
the one hand are the mavericks of this world that hog the limelight with their ingenious ways and
gather disciples by the dozens. On the other end of the spectrum, at a tiny corner are the "value
players" entities, who consider money to be their raw material, their stock in trade - to be used
wisely and judiciously for the creation of wealth. Here, "risk" is not a factor of reward, risk is the
natural predator, to be guarded against at all times - the same way we guard against the other
silent destroyer, "greed". Rewards are not spectacular but steady. And growth is measured in
terms of a consistently rising performance graph.
In order to achieve its aim, the company is planning to diversify its activities and to take up Fee
based activities also within its ambit. Presently the areas covered by the company are:
 Automobile Finance
 Shares
 Real Estate

BOARD OF DIRECTORS
Mr. Sanjay Kumar Gupta Executive Director & CFO
Mr. Aloke Kumar Gupta Non-Executive Director
Mrs. Shreya Gupta Non-Executive Director
Mrs. Anny Jain Independent Director
Mr. Suvabrato Ganguly Independent Director
Mr. Sanjay Goenka Independent Director
Mr. Ravi Agarwalla Independent Director
Ms. Swati Sharma Company Secretary

CHAPTER-2
2.1 REVIEW OF LITERATURE

REVIEW OF LITERATURE
1.) Aghdas Jafari Motlagh, (2013) "According to him in his study he studies about how statement
of cash flow is prepared and how it is differentiated from funds flow statement. The study used
the secondary data collected from various websites,journals, etc. The found that funds flow
statement is not useful in short term financial planning like cash flow statement because the cash
is more important for execute the plan in short run as compared to working capital.
2.) Thomas Zeeker and Brian Stanko, (1990's) "This research paper studies about wether the cash
flow ratio is useful for the financial ratio analysis of retail sellers. The study used the primary
data to conduct this research. The study found that the cash flow statement for retail sellers is
useful to find out the financial ratios and it is also found that not only based the accrual basis of
accounting, the new and traditional accounting methods should be implemented to assess the
economic status or financial position of retail firm.
3.) Ajay Paliwal, Mukesh Ahirrao and Rana, (2015) "According to him, the term cash flow
statement is an important tool to analyze the financial performance of a firm and the cash flow
changes can be identified only by comparing the financial position of a firm for two years. The
study found the net changes in net cash in cash and it's distribution in three business activities
and also found the strength and weakness in cash flow statement.
4.) Jeffrey Hales and Steven Orpurt, (2013)"According to them they analyzed that though many
financial statement users have given more importance to direct method, some of the financial
statement users have given importance to indirect method of cash flow statement. They found
that the direct method information is economically significant and that the recurring benefits that
many firms derive from providing direct method information likely exceed recurring cost.
5.)Study by Jordan, Waldron, and Clark (2007) in USA compared ability of cash flow from
operations, earnings and sales in predicting future cash flow of 100 companies of the Fortune
1000 companies and finds that sales are a better predictor of future cash flow than cash flow
from operations and earnings.
6.)Al Attar and Hussein (2004) predicted future cash flow of UK firms by using cash flow from
operations, earnings, and its components and reported that the cash flow from operations alone
outperform earnings in predicting future cash flows.
7.)Farshadfar et al.(2008) and Habib (2010) predicted future cash flows by using a sample of
listed Australian firms and found that cash flow from operations has more power in predicting
future cash flows compared to other predictor variables used in their study.
8.)Al Debie (2011) also provide evidence for the superior ability of cash flow from operations in
predicting future cash flows of listed firms at Amman stock exchange. Similar conclusions were
drawn in India, Iran, and Malaysia by Mulenga (2015);

9.)A.Ahmadi and V.Ahmadi (2012); Mooi (2007) respectively. On the other hand, the
conclusion is in line with the findings of Shubita (2013), who reports that earnings plus
depreciation and amortization are a better predictor of future cash flow.
10.)Another study by Takhtae and Karimi (2013) and Moeinaddin, Ardakani, & Akhoondzadeh
(2013) predicted future cash flow of Iranian firms and report different results. A study by
Takhtae and Karimi (2013) find that earnings outperform cash flow from operations which
support FASB assertion on the superiority of earnings in predicting future cash flows. While
Moeinan et al (2013) concluded that earnings and earnings plus depreciation and amortization
outperform other predictor variables in the prediction of future cash flows.
INTRODUCTION:
Cash is the basic input needed to keep the operations of the business going
on a continuing basis; it is also the final output expected to be realized by selling the
product manufactured by the manufacturing unit. Cash is both the beginning and the
ending of the business operations.
Sometimes, it is so happens that a business unit earns sufficient

profit, but inspire of this is not able to pay its liabilities when they become due.
Therefore, a business unit should always try to keep sufficient cash, neither more nor less
because shortage of cash will threaten the firm‘s liquidity and solvency, where as
excessive of cash will not be fruitfully utilized, will simply remain idle and will affect the
profitability of ac concern. Effective cash management therefore implies a proper
balancing between the two conflicting objectives of liquidity and profitability.
The management of cash also assumes importance because it is difficult to

predict coincidence between the inflows and outflows accurately and there is no perfect
coincidence between the inflows or cash inflows exceeding cash outflows. Cash flow
statement is one f the tool of cash management because it throws light on cash inflows
and cash out flows of a particular period.
Meaning of Cash flow:

A cash flow analysis is more useful because it gives detailed information
to the management about the sources of cash inflows and outflows. Cash flow analysis
means to reveal the cash outflows and cash inflows in a particular period. An analysis of
cash flows is useful for short run planning.

Definition:
Cash flow analysis can be defined
“As a statement which summaries sources of cash inflows and outflows of

particular period of time, say a month or a year.”
Such statement can be prepared from the data made available from
comparative balance sheets, profit and loss account and additional information.
It is an essential tool short term financial analysis and is very helpful in the
evaluation of current liquidity of a business concern. It helps the business executives of a
business in the efficient cash management and internal financial management. It is
evaluating the cash inflows and outflows of company‘s during a particular period. It
reveals the cash position of the company.
Objective of Cash flow Analysis:

1. The economic decisions that are taken by users require an evaluation of the ability of
an enterprise to generate cash and cash equivalents and the timing and certainty of their
generation.
2. It deals with the provision of information about the historical changes in cash and cash
equivalents of an enterprise by means of cash flow statement which classifies the flow
during the period from operating, investing and financing activities.
3. Information about the cash flows of enterprise is useful in providing users of financial
statements with a basis to assets the ability of enterprise to generate cash and cash
equivalents and the needs of the enterprise to utilize those cash flows.
Applications of Cash Flow Analysis:

1. Predicts future cash flows.
2. Determines the ability to pay dividends and other commitments.
3. Shows the relationship of net income to change in the business cash.
4. Efficiency in the cash management.
5. Discloses movement of cash.
6. Discloses success or failure of cash planning.

7. Evaluate management decisions.
8. Enhances the comparability of reports.
Limitations of Cash Flow Analysis:

In spite of various uses of cash flow statement, it has the following limitations:
1. Cash flow statement gives the main of inflow and out flow of cash only and does not
show the liquidity position of the company
2. This statement is not a substitute of income statement which shows both cash and non
cash items. Therefore net cash flow does not necessary mean net income of the business.
3. It cannot replace funds flow statement as it cannot show the financial position of the
concern in totally.
MOTIVES FOR HOLDING CASH:

The firms need to hold cash may be attitude to the following three
motives;
1. The transaction motive
2. The precautionary motive
3. The speculative motive
4. The compensation motive
Transaction Motive:
An important reason for maintaining cash balances is the transaction
motive. This refers to the holding of cash, to meet routine cash requirements to finance
the transactions which a firm carriers on the ordinary course of business. A firm enters
into a variety of transactions to accomplish its objectives which have to be paid form in
the form of cash. For example, cash payments have to be made for purchases, wages,
operating expenses, financial charges like interest, taxes, and so on.

Similarly, there is a regular inflow of cash to the firm from sales

operations, returns on outside investments, etc. these receipts and payments constitute a
continuous two way flow of cash. But the inflows and outflows do not perfectly coincide
or synchronies, that is they do not exactly match. At times, receipts exceed outflows
while, at other times, payments exceed inflows. To ensure that firm can meet its
obligations when payments becoming due in a situation in which disbursements are in
excess of the current receipts, it must have an adequate cash balances.
The requirement of cash balances to meet routine cash needs is known as

the transactions motive at such cash balances are termed as transaction balances. Thus,
the transaction motive refers to the holding of cash to meet anticipated obligations whose
timing is not perfectly synchronized with the cash receipts. If the receipts of cash and its
disbursements could exactly coincide in the normal course of operations, a firm would
not need cash for transaction purposes. Although a major part of transaction balances are
held in cash, a part may also be in such marketable securities whose maturity confirms to
the timing of the anticipated payments, such as payment of taxes, dividends, etc.
Precautionary Motive:
In addition the non –synchronization of anticipated cash inflows and
outflows in the ordinary course of business, a firm may have to pay cash for purposes
which cannot be predicted or anticipated. The unexpected cash needs at short notice may
be result of;
 Floods, strikes and failure of important customers.
 Bills may be presented for settlement earlier than expected.
 Unexpected slow down in collection of accounts receivable.
 Sharp increase in cost of material.
The cash balance held in reserve for such random and unforeseen
fluctuations in cash flows are called as precautionary balances. In other words, a
precautionary motive of holding cash implies the need to hold cash to meet unpredictable
obligations. Thus precautionary cash balance serves to provide a cushion to meet
unexpected contingencies.
Another factor which has a bearing in the level of such cash balances is
the availability of short term credit. It firm cash borrow at short notice to pay for
unforeseen obligations, it will need to maintain relatively small balance and vice-versa.
Such cash balances are usually held in the form of marketable securities so that they earn
a return.

Speculator Motive:
It refers to the desire of a firm to make advantage of opportunities which
present themselves at unexpected moments and which are typically outside the normal
course of business. While the precautionary motive is defensive in nature, in that, firms
must take provisions to tide over unexpected contingencies, the speculative motive
represents a positive and aggressive approach. Firms aim top exploit profitable
opportunities and keep cash in reserve to do so. The speculative motive helps to take in
advantage of;
 An opportunity to purchase raw materials at reduced price on payment of

immediate cash
 A chance to speculate to interest rate movements by using securities when interest
rates are expected to decline
 Delay purchase of raw materials on the anticipation of decline in prices; and
 To make purchases at favorable prices.
Compensative Motive:
Another motive to hold cash balances is to compensate banks for
providing certain services and loans.
Banks provide a variety of services to business firms, such as clearance of

Cheque, supply of credit information, transfer of funds, etc. While for some of the
services banks charge a commission or fee, for others seek indirect compensation.
Usually, clients are required to maintain a minimum balance of cash at the bank. Since
this balance cannot be utilized by the firm to earn a return. To be compensated for their
services indirectly in this firm, they require the clients to always keep a bank balances
sufficient to earn a return equal to the cost of services. Such balances are compensating
balances.

PREPERATION OF CASH FLOW STATEMENT:

An organization should prepare a cash flow statement according to
accounting standard -3. The following basic information is required for preparation of
cash flow statement:
1. Comparative balance sheets.
2. Profit and loss account.
3. Additional data.
There are two methods to prepare the cash flow statement
i) Direct method and
ii) Indirect method.
DIRECT METHOD:
The direct method includes all direct income and expenditure. In the direct method the
cash flow statement is computed by deducting the cash sales from cash expenses. In the
direct method the each income statement is converted directly into a cash basis, and each
effect is directly reported. In this method once the cash inflow and outflow from
operating activities is calculated then it is added to the “Operating Activity” section of the
cash flow statement to obtain the net cash flow for a company’s operating activity.1
Format for estimating Net Cash flows from Operating

Activities (Direct Method)
PARTICULARS AMOUNT AMOUNT
(RS.) (RS.)
Cash sales …
Cash receipts from customers …
Cash paid to suppliers …
Cash paid to employees (…)
Cash paid to expenses (…)

Cash generated from operations …
Income – tax paid (…)
Cash flows before extra-ordinary items …
Proceeds from earthquake disaster settlement …
Net cash from operating activities

….
INDIRECT METHOD:
Indirect/add back method for calculating cash flow, the accrual basis net income
is established first. This net income is then indirectly adjusted for items that affected the reported
net income but did not involve cash. The indirect method adjusts the net income for the
following phenomenon: i) changes in current assets, ii) changes in current liabilities and items
that where included in the net income but did not affect cash.
Format for estimating Net Cash flows from Operating Activities

(Indirect Method)
PARTICULARS AMOUNT AMOUNT
(RS.) (RS.)
Net Profit before taxation and extra-ordinary items ...
Adjustments for:
…
Depreciation
…
Loss on Sale of Assets
…
Foreign Exchange Loss
(…)
Profit on Sale of Assets
…
Interest Expense
(…)
Income from Investments
Operating Profit before Working Capital Changes …
Increase in Current Assets (…)
Decrease in Current Assets …
Increase in Current liabilities …

Decrease in Current liabilities (…)
Cash Generated from Operations …
Income-tax Paid (…)
Cash Flows before Extra-ordinary Items …
Proceeds from Earthquake Disaster Settlement …
Net Cash from Operating Activities

....
There are three steps involved in the preparation of cash flow statements. They are:
 Net profit before taxation and extraordinary items
 Cash flow from operating, investing, and financing activities Cash flow statement.
 Changes in fixed assets and fixed liabilities have not been adjusted as these are
shown separately in the cash flow statement. It is so because current assets and
current liabilities are directly related to operations. Cash paid is deducted from
cash generated from operations in order to get the figure of cash flow before
extraordinary items in order to get the figure of cash provided by or using from
operating activities.
SPECIAL ITEMS:
In addition to the general classification of three types of cash flows
accounting standard-3 for the treatment of cash flows of certain so cialitema under;
Foreign currency cash flows.
a) Extraordinary items.
b) Interest and dividends.
c) Taxes on income.
d) Investments in subsidiaries, associates and joint ventures.
e) Acquisitions and disposal of subsidiaries and other business units.
f) Non cash transactions.
 The acquisition of assets by assuming directly related liabilities

 The acquisition of an enterprise by means of issue of shares and
 The conversion of debt to equity.
So cash flow analysis reveals the various items of inflow and outflow of cash. It is an
essential tool for short term financial analysis and is very helpful in the evaluation of
current liability of a business concern. It helps the business executives of a business in the
efficient cash management and internal financial management.
OBJECTIVESOF CASH FLOW STATEMENT:

Information about the cash flows of an enterprise is useful in providing
users of financial statement with a basis to assess the ability of the enterprise to generate
cash and cash equivalents and the needs of the enterprises to utilize those cash flows.
The statement deals with the provision of information about the historical
changes in cash and cash equivalents of an enterprise by means of a cash flow statement
which classified cash flows during the period from operating, investing and financing
activities.
CLASSIFICATION OF CASH FLOWS

According to AS-3 (Revised), the cash flow statement should report cash flows
during the period classified by operating, investing and financing activities, thus, cash
flows are classified into three main categories.

1. CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operating activities are primarily derived from the
principal revenue-producing activities of the enterprise.
Examples:
 Cash receipt from the sale of goods and the rendering of service.
 Cash payments to suppliers of goods and services

PROFORMA OF CASH FROM OPERATIONS
2. CASH FLOWS FROM INVESTING ACTIVITIES
Investing activities are the acquisition and disposal of long-term assets and other
investments not include in cash equivalents.
Examples:
 Cash payments to acquire fixed assets
 Cash receipts from disposal of fixed assets
 Cash payments to acquire shares, warrants, or debt instruments of other enterprises and
interests in joint ventures.
 Cash receipts from disposal of shares, warrants or debt instruments of other enterprise and
interest in joint ventures.
 Cash advances and loans made to third parties

 Cash receipts from the repayment of advances and loans made to third parties
3. CASH FLOWS FROM FINANCING ACTIVITIES
`Financing activities are activities that result in changes in the size and composition of the
owner‘s capital.
Examples:
 Cash proceeds from issuing shares or other similar instruments.
 Cash proceeds from issuing debentures, loans, notes, bonds and other short-or long-term
borrowings and
 Cash repayments of amounts borrowed such as redemption of debentures, bonds and

preference shares.
PROFORMA OF CASH FLOW STATEMENT

PROCEDURE FOR PREPARING A CASH FLOW STATEMENT

Cash flow statement is not substitute of profit and loss account ( income
statement) and balance sheet. It provides additional information and explains the reasons for
changes in cash and cash equivalents, derived from financial statement at two points of time. The
procedure for preparing a cash flow statement is different from the procedure followed in respect
of profit and loss account and balance sheet.
It is prepared with the help of financial statements. The basic information required for the
preparation of cash flow statement is obtained from the following three sources.
1. Comparative balance sheets at two points of time. I.e. in the beginning and at end of the
accounting period.
2. Income statement of the current accounting period or the profit and loss account.
3. Some selected additional data to extract the hidden transactions.
The preparation of a cash flow statement involves the following steps.
STEP 1
Compute the net increases or decreases in cash and cash equivalents by making a
comparison of these accounts given in the comparative balance sheets.
STEP 2
Calculate the net cash flow provided (used in) operating activities by analyzing
the profit and loss account, balance sheet and additional information.
There are two methods of converting net income into net cash flows from operating activities:
The direct method and indirect method.
STEP 3
Calculate the net cash flow from investing activities.
STEP 4

Calculate the net cash flow from financing activities.
STEP 5
Prepare a formal cash flow statement highlighting the net cash flow from
operating, investing and financing activities separately.
STEP 6
Make an aggregate of net cash flows from the three activities ensure that the total net
cash flow is equal to the net increase or decrease in cash and cash equivalents as computed in
step1.
STEP 7
Report significant non-cash transactions that did not involve cash or cash Equivalents in a
separate schedule to the cash flow statement.
Example
Purchase of machinery against issue of share capital or redemption of debentures

in exchange for share capital.
USES OF CASH FLOW STATREMENT
A cash flow statement is of vital imp to the financial management. It is an essential tool
of financial analysis for short-term planning.
1. Helps in efficient cash management
2. Helps in internal financial management
3. Discloses the movements of cash
4. Discloses success or failure of cash planning
Advantages of a Cash Flow Statement
1. Verifying Profitability and Liquidity Positions.

2. Verifying Capital Cash Balance.

3. Cash Management.
4. Planning and Coordination.
5. Superiority over Accrual Basis of Accounting.
Limitations of cash flow statement:

Despite a number of uses cash flow statements suffers from the following limitations.
1. As cash flow statement is based on cash basis of accounting, it ignores the basic
accounting concept of accrual basis.
2. Some people feel that as worming capital is a wide concept of funds, a funds flow
statement provides a more complete picture than cash flow statement.
3. Cash flow statement is not suitable for judging the profitability of a firm as non-cash
charge are ignored while calculating cash flows from operating activity

CHAPTER-3
3.1 RESEARCH MEATHODOLOGY
3.2 OBJECTIVES OF THE STUDY
3.3 STATEMENT OF THE PROBLEM
3.4 NEED FOR THE STUDY
3.5 SCOPE OF THE STUDY
3.6 LIMITATIONS OF THE STUDY

RESEARCH METHODOLOGY
SOURCES OF DATA:
The data is collected in two ways.
 Primary data
 Secondary data
1. PRIMARY DATA
The required data for this study would be collected through the only from secondary data
2. SECONDARY DATA
The information was collected from the financial statement, (i.e.; balance sheet & cash
flow statements) internet, journals & news papers
 Published Annual Reports of the companies for the financial years 2015-16 to 2019–20.
 Website of paragon finance ltd.
 Other related websites

OBJECTIVES OF THE STUDY:

 To provide information about the cash inflows and cash out flows from operating, finance
and investing activities of the company paragon finance limited.
 To show the impact of the operating, finance and investing activities on cash resources.
 To identify the financial needs and help in forecasting future cash flows.
 To know the liquidity position of paragon finance limited.

STATEMENT OF THE PROBLEM:

A financial statement contains income statement showing sales, revenues, tax
expenses etc. On the other side; the balance sheet shows the liabilities and assets position during
the year.
 Analysis of the liquidity between current liabilities and assets.
 Analysis of the liquidity and profitability of the current assets and current liabilities.
 Analysis of the long term financial of the firm over a period of time.
 Analysis of various components of working capital



NEED FOR THE STUDY:

 To study the cash position of the business.
 To study the liquidity & solvency of the business [shorter].
 To study the maintenance of cash inflows and cash out flows.
 To study the cash flow from operating ,investing, financing activities
 The study is on internal financing pattern of cash flow statement which deals with the
cash position of the company

SCOPE OF THE STUDY:

 Information about the cash flows of an enterprise is useful in providing users of financial
statement with a basis to assess the ability of the enterprise to generate cash and cash
equivalents and the needs of the enterprises to utilize those cash flows.
 The statement deals with the provision of information about the historical changes in
cash and cash equivalents of an enterprise by means of a cash flow statement which
classified cash flows during the period from operating, investing and financing activities.
 Cash flow statement is a financial statement that presents cash information about the
company.
 The present study is undertaken with an intention that it would be helpful in assessing
the cash position in the company
 The study also highlights the cash management of Paragon finance limited
 This study is done for a period of 5 years from 2015-16 to 2019-20

LIMITATIONS OF THE STUDY:

 The analysis done only for a period of five years i.e. 2015 to 2020.
 The study is based on secondary data; the secondary data has its own
limitations like being inaccurate or vauge
 Some external factors also could affect directly or indirectly to the company's efficiency.
But it is not easy to judge completely right about them.
 Due to COVID-19 there is no possibility to visit the workplace.

CHAPTER-4
4.1 DATA ANALYSIS AND

INTERPRETATION

DATA ANALYSIS & INTERPRETATION
Cash flow statement of Paragon Finance Ltd (in Rs.cr)

Cash flow statement for the year 2015-2016

INTERPRETATION
• From the above picture we see that the cash flow from operating activities has
decreased from 6.36(2015) to 3.07(2016) which indicates decrease in revenue from
business activities.
• Cash and cash equivalents at the beginning of the year is 2.37 and at the end is 2.43

GRAPH FOR THE YEAR 2015-2016
amt in crs
4
2016
2015
2
0
operating activities investment activities financing activities
-2
-4
-6

CASH FLOW STATEMENT OF PARAGON FINANCE LTD
Cash Flow Statement for The Year Ended 31st March, 2017
March 31,2017 March 31, 2016
A. CASH FLOW FROM OPERATING ACTIVITIES () ()
Net Profit before Tax & Extra ordinary items & interest 31931718 15331642
Adjustment for :
Depreciation 1764060 1962651
Contingent Provision against Standard Assets 117418 (140563)
Extra Ordinary Items 0 0
Profit/ Loss on Sale of Fixed Assets (7759222) 0
26053974 17153730
Operating Profit before Working Capital changes
Adjustment for:
Long Term Loans and Advances (36580246) 6555477
Trade Receivables (419470) 572326
Short Term Loans and Advances 4598304 29206087
Other Non Current Assets 10000 (1139)
Other Long Term Liabilities 0 (14000)
Other Current Liabilities (1991810) (5413989)
Cash generated from Operation (8329248) 48058492

Interest Paid (8676262) (9425722)
Tax Paid (5285224) (1227321)
Net Cash from Operating activities ( A ) (22290734) 37405449
B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (1673483) (1494675)
Sale of Fixed Assets 10000000 0
Sale of Investments 6148307 (7310665)
Net Cash from Investing activities ( B ) 14474824 (8805340)
C. CASH FLOW FROM FINANCING ACTIVITIES

Loans borrowed ( Net of repayments) 7052108 (28030094)
Net Cash from Financing activities ( C ) 7052108 (28030094)

Net increase in Cash and Cash equivalent ( A+B+C ) (763802) 570015
Cash and Cash equivalents at the begining of the year 24301000 23730985
Cash & Cash equivalents of close of the year 23537198 24301000
INTERPRETATION
decreased from 3.74(2016) to - 2.22(2017) which indicates less revenue from business
activities

amt in crs
2
2017
2016
1
0
-1
-2
-3


March 31,2018 March 31, 2017
A. CASH FLOW FROM OPERATING ACTIVITIES (`) (`)
Net Profit before Tax & Extra ordinary items & interest 3,07,65,515 3,19,31,718
Adjustment for :
Depreciation 14,53,699 17,64,060
Contingent Provision against Standard Assets (41,996) 1,17,418
Provision for Bad & Doubtful Debts 11,04,124 0
Profit/ Loss on Sale of Fixed Assets
(9,75,200) (77,59,222)
3,23,06,142 2,60,53,974
Adjustment for:
Long Term Loans and Advances 83,20,063 (3,65,80,246)
Trade Receivables 4,19,120 (4,19,470)
Short Term Loans and Advances 1,89,96,293 45,98,304
Other Non Current Assets 0 10,000
Other Long Term Liabilities 0 0
Other Current Liabilities (84,83,336) (19,91,810)
Cash generated from Operation 5,15,58,282 (83,29,248)

Interest Paid (48,32,333) (86,76,262)
Tax Paid (54,57,426) (52,85,224)
Net Cash from Operating activities ( A ) 4,12,68,523 (2,22,90,734)

Purchase of Fixed Assets (22,07,411) (16,73,483)
Sale of Fixed Assets 30,28,750 1,00,00,000
Sale of Investments 1,14,39,037 61,48,307
Net Cash from Investing activities ( B ) 1,22,60,376 1,44,74,824

Loans borrowed ( Net of repayments) (7,03,18,207) 70,52,108

Net Cash from Financing activities ( C ) (7,03,18,207) 70,52,108
Net increase in Cash and Cash equivalent ( A+B+C ) (1,67,89,308) (7,63,802)

Cash and Cash equivalents at the begining of the year 2,35,37,198 2,43,01,000
Cash & Cash equivalents of close of the year 67,47,890 2,35,37,198
INTERPRETATION
increased from 2.22(2017) to 4.13(2018) which indicates revenue from business
activities

amt in crs
2
2018
2017
0
-2
-4
-6
-8


March 31,2019 March 31, 2018
Adjustment for :
Depreciation 10,46,602 14,53,699
Contingent Provision against Standard Assets 20,935 -41,996
Provision for Bad & Doubtful Debts 6,02,645 11,04,124
Profit/ Loss on Sale of Fixed Assets 2,88,164 -9,75,200
3,75,65,600 3,23,06,142
Adjustment for:
Long Term Loans and Advances 3,49,52,674 83,20,063
Trade Receivables 350 4,19,120
Short Term Loans and Advances -4,32,97,405 1,89,96,293
Other Current Liabilities -8,80,740 -84,83,336
Cash generated from Operation 2,83,40,479 5,15,58,282

Interest Paid -8,00,129 -48,32,333
Tax Paid -72,70,650 -54,57,426
Net Cash from Operating activities ( A ) 2,02,69,700 4,12,68,523

Purchase of Fixed Assets - Property, Plant & Equipments -69,407 -22,07,411
Sale of Fixed Assets - Property, Plant & Equipments 2,41,499 30,28,750
Sale of Investments -95,47,016 1,14,39,037
Net Cash from Investing activities ( B ) -93,74,924 1,22,60,376

Loans borrowed ( Net of repayments) -22,15,109 -7,03,18,207
Net Cash from Financing activities ( C ) -22,15,109 -7,03,18,207

Net increase in Cash and Bank Balances ( A+B+C ) 86,79,667 -1,67,89,308
Cash and Bank Balances at the begining of the year 67,47,890 2,35,37,198
Cash and Bank Balances of close of the year 1,54,27,557 67,47,890
INTERPRETATION
decreased from 4.13(2018) to 2.02(2019) which indicates less revenue from business
activities

amt in crs
2 2019
2018
0
-2
-4
-6
-8


As at As at
March March 31,
31,2020 2019
A. CASH FLOW FROM OPERATING ACTIVITIES
Net Profit before Tax & Extra ordinary items 198.14 179.62
Adjustment for :
Net Gain/ Loss on Fair Value Changes 3.61 -2.91
Depreciation 7.01 10.47
Impairment on financial instruments 15.72 6.24
Unmaortised Brokerage 19.82 9.23
Loss on Sale of Fixed Assets 0.00 2.88
Operating Profit before Working Capital changes 244.30 205.53
Adjustment for:
Loans -166.46 -92.93
Trade Receivables 0.00 -0.00
Other Financial Assets -108.79 19.88
Other Non Financial Assets 0.09 0.09
Other financial liabilities 1.51 4.81
Other non financial liabilities -2.33 -3.51
Cash generated from Operation -31.69 133.86
Tax Paid -47.11 -82.20
Net Cash from Operating activities ( A ) -78.80 51.66
Purchase of Fixed Assets - Property, Plant &
Equipments -0.76 -0.69
Sale of Fixed Assets - Property, Plant & Equipments 0.00 2.42
Change in Investments -17.60 65.67
Net Cash from Investing activities ( B ) -18.36 67.39
C. CASH FLOW FROM FINANCING ACTIVITIES 107.47 -32.26
Borrowings 107.47 -32.26
Net Cash from Financing activities ( C )
Net increase in Cash and Bank Balances ( A+B+C ) 10.31 86.80
Cash and Bank Balances at the begining of the year 154.28 67.48
Cash and Bank Balances at the close of the year 164.59 154.28

INTERPRETATION
decreased from 2.02(2019) to -78.80(2020) which indicates less revenue from
business activities
• Cash and cash equivalents at the beginning of the year is 154.28 and at the end is
164.59

120
100
80
60
40
2020
20 2019
0
operating activities investing activities financing activities
-20
-40
-60
-80

CHAPTER-5
5.1 FINDINGS
5.2 SUGGESTIONS
5.3 CONCLUSION

FINDINGS
 From the above we can see that in 3 out of 5 years the company has shown negative
balance in investing activities which indicates either companies investment in future
growth or that the company is making poor asset purchasing decisions
 We can also see companies self-sufficient and strong financial position as it never
showed negative balance in its income from net operating activities.
 The long term survival of the company proves it's effective financial planning

SUGGESTIONS
General suggestions for the company according to financial point of view are:
 For better cash flow from investing activities try to lease fixed assets instead of
buying.
 The variances raising by each factor must be recorded and decisions must be made
for better cash management.

CONCLUSION
• From the above study we can say that the Cash flow profile of paragon finance
limited is good and they are maintaining sufficient cash reserves to meet their cash
outflow requirements.
• The statement of cash flows is very important to investors because it shows how
much actual cash a company has generated. The income statement, on the other
hand, often includes noncash revenues or expenses, which the statement of cash
flows excludes.

BIBLIOGRAPHY
 I. M. Pandey., ―Financial Management‖, Vikas Publishing House,Ninth Edition,

2009.
 Prasanna Chandra., ―Financial Management‖, Tata McGraw-Hill Publishing

Company Ltd, Seventh Edition, 2008.
 M. Y. Khan & P. K. Jain,. ―Financial Management‖, Tata McGraw-Hill Publishing

Company Ltd, Fifth edition, 2007.
 K. Rajeswara Rao, G,Prasad. ―Accounting and finance‖ jabharath publications 2007
Annual reports
 Annual reports of PARAGON FINANCE LTD, RANCHI. (During the period2015-
16 to 2019-20)
Internet
 www.paragonfinanceltd.com
 www.google.com

ANNEXURE

Cash flow statement for the year ended 31st march 2017
March 31,2017 March 31, 2016

Net Profit before Tax & Extra ordinary items & interest 31931718 15331642
Adjustment for :
Depreciation 1764060 1962651
Contingent Provision against Standard Assets 117418 (140563)
Profit/ Loss on Sale of Fixed Assets (7759222) 0
26053974 17153730
Adjustment for:
Long Term Loans and Advances (36580246) 6555477
Trade Receivables (419470) 572326
Short Term Loans and Advances 4598304 29206087
Other Non Current Assets 10000 (1139)
Other Long Term Liabilities 0 (14000)
Other Current Liabilities (1991810) (5413989)
Cash generated from Operation (8329248) 48058492

Interest Paid (8676262) (9425722)
Tax Paid (5285224) (1227321)
Net Cash from Operating activities ( A ) (22290734) 37405449

Purchase of Fixed Assets (1673483) (1494675)
Sale of Fixed Assets 10000000 0
Sale of Investments 6148307 (7310665)
Net Cash from Investing activities ( B ) 14474824 (8805340)

Loans borrowed ( Net of repayments) 7052108 (28030094)
Net Cash from Financing activities ( C ) 7052108 (28030094)

Net increase in Cash and Cash equivalent ( A+B+C ) (763802) 570015
Cash and Cash equivalents at the begining of the year 24301000 23730985
Cash & Cash equivalents of close of the year 23537198 24301000
March 31,2018 March 31, 2017

A. CASH FLOW FROM OPERATING ACTIVITIES (`) (`)
Adjustment for :
Depreciation 14,53,699 17,64,060
Contingent Provision against Standard Assets (41,996) 1,17,418
Provision for Bad & Doubtful Debts 11,04,124 0
Profit/ Loss on Sale of Fixed Assets
(9,75,200) (77,59,222)
3,23,06,142 2,60,53,974
Adjustment for:
Long Term Loans and Advances 83,20,063 (3,65,80,246)
Trade Receivables 4,19,120 (4,19,470)
Short Term Loans and Advances 1,89,96,293 45,98,304
Other Non Current Assets 0 10,000
Other Long Term Liabilities 0 0
Other Current Liabilities (84,83,336) (19,91,810)
Cash generated from Operation 5,15,58,282 (83,29,248)

Interest Paid (48,32,333) (86,76,262)
Tax Paid (54,57,426) (52,85,224)
Net Cash from Operating activities ( A ) 4,12,68,523 (2,22,90,734)

Purchase of Fixed Assets (22,07,411) (16,73,483)
Sale of Fixed Assets 30,28,750 1,00,00,000
Sale of Investments 1,14,39,037 61,48,307

Net Cash from Investing activities ( B ) 1,22,60,376 1,44,74,824

Loans borrowed ( Net of repayments) (7,03,18,207) 70,52,108
Net Cash from Financing activities ( C ) (7,03,18,207) 70,52,108
Net increase in Cash and Cash equivalent ( A+B+C ) (1,67,89,308) (7,63,802)

Cash and Cash equivalents at the begining of the year 2,35,37,198 2,43,01,000
Cash & Cash equivalents of close of the year 67,47,890 2,35,37,198
March 31,2019 March 31, 2018

Adjustment for :
Depreciation 10,46,602 14,53,699
Contingent Provision against Standard Assets 20,935 -41,996
Provision for Bad & Doubtful Debts 6,02,645 11,04,124
Profit/ Loss on Sale of Fixed Assets 2,88,164 -9,75,200
3,75,65,600 3,23,06,142
Adjustment for:
Long Term Loans and Advances 3,49,52,674 83,20,063
Trade Receivables 350 4,19,120
Short Term Loans and Advances -4,32,97,405 1,89,96,293
Other Current Liabilities -8,80,740 -84,83,336
Cash generated from Operation 2,83,40,479 5,15,58,282

Interest Paid -8,00,129 -48,32,333
Tax Paid -72,70,650 -54,57,426
Net Cash from Operating activities ( A ) 2,02,69,700 4,12,68,523

Purchase of Fixed Assets - Property, Plant & Equipments -69,407 -22,07,411

Sale of Fixed Assets - Property, Plant & Equipments 2,41,499 30,28,750
Sale of Investments -95,47,016 1,14,39,037
Net Cash from Investing activities ( B ) -93,74,924 1,22,60,376

Loans borrowed ( Net of repayments) -22,15,109 -7,03,18,207
Net Cash from Financing activities ( C ) -22,15,109 -7,03,18,207
Net increase in Cash and Bank Balances ( A+B+C ) 86,79,667 -1,67,89,308
Cash and Bank Balances at the begining of the year 67,47,890 2,35,37,198
Cash and Bank Balances of close of the year 1,54,27,557 67,47,890
As at As at
March March 31,
31,2020 2019
A. CASH FLOW FROM OPERATING ACTIVITIES
Net Profit before Tax & Extra ordinary items 198.14 179.62
Adjustment for :
Net Gain/ Loss on Fair Value Changes 3.61 -2.91
Depreciation 7.01 10.47
Impairment on financial instruments 15.72 6.24
Unmaortised Brokerage 19.82 9.23
Loss on Sale of Fixed Assets 0.00 2.88
Operating Profit before Working Capital changes 244.30 205.53
Adjustment for:
Loans -166.46 -92.93
Trade Receivables 0.00 -0.00
Other Financial Assets -108.79 19.88
Other Non Financial Assets 0.09 0.09
Other financial liabilities 1.51 4.81
Other non financial liabilities -2.33 -3.51
Cash generated from Operation -31.69 133.86
Tax Paid -47.11 -82.20

Net Cash from Operating activities ( A ) -78.80 51.66

Purchase of Fixed Assets - Property, Plant &
Equipments -0.76 -0.69
Sale of Fixed Assets - Property, Plant & Equipments 0.00 2.42
Change in Investments -17.60 65.67
Net Cash from Investing activities ( B ) -18.36 67.39
C. CASH FLOW FROM FINANCING ACTIVITIES 107.47 -32.26
Borrowings 107.47 -32.26
Net Cash from Financing activities ( C )
Net increase in Cash and Bank Balances ( A+B+C ) 10.31 86.80
Cash and Bank Balances at the begining of the year 154.28 67.48
Cash and Bank Balances at the close of the year 164.59 154.28
CONSOLIDATED BALANCE SHEET OF PARAGON FINANCE LTD FORM (2016-2020)
Balance Sheet of Paragon Finance (in Rs. Cr.) Mar 20 Mar 19 Mar 18 Mar 17 Mar 16
12 12 12 12 12

mths mths mths mths mths
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 4.25 4.25 4.25 4.25 4.25
Total Share Capital 4.25 4.25 4.25 4.25 4.25
Reserves and Surplus 20.50 19.95 17.93 15.86 14.09
Total Reserves and Surplus 20.50 19.95 17.93 15.86 14.09
Total Shareholders Funds 24.75 24.20 22.18 20.11 18.34
NON-CURRENT LIABILITIES
Long Term Borrowings 0.00 0.00 1.21 6.63 6.41
Deferred Tax Liabilities [Net] 0.00 0.00 0.00 0.00 0.00
Other Long Term Liabilities 0.04 0.06 0.00 0.00 0.00
Long Term Provisions 0.00 0.00 0.01 0.02 0.01
Total Non-Current Liabilities 0.04 0.06 1.23 6.65 6.42
CURRENT LIABILITIES
Short Term Borrowings 2.48 1.41 0.38 1.99 1.51
Trade Payables 0.00 0.00 0.00 0.00 0.00
Other Current Liabilities 0.10 0.09 0.28 1.13 1.33
Short Term Provisions 0.00 0.00 0.14 0.03 0.03
Total Current Liabilities 2.59 1.50 0.80 3.15 2.86
Total Capital And Liabilities 27.37 25.76 24.21 29.91 27.62

ASSETS
NON-CURRENT ASSETS
Tangible Assets 0.16 0.22 0.37 0.50 0.74
Intangible Assets 0.00 0.00 0.00 0.00 0.00
Capital Work-In-Progress 0.00 0.00 0.00 0.00 0.00
Other Assets 0.00 0.00 0.00 0.00 0.00
Fixed Assets 0.16 0.22 0.37 0.50 0.74
Non-Current Investments 0.00 0.00 4.50 5.65 6.26
Deferred Tax Assets [Net] 0.31 0.14 0.09 0.07 0.10
Long Term Loans And Advances 0.00 0.00 6.13 6.96 3.30
Other Non-Current Assets 0.41 0.60 0.00 0.00 0.00
Total Non-Current Assets 0.88 0.97 11.10 13.18 10.40
CURRENT ASSETS
Current Investments 3.38 4.38 0.00 0.00 0.00
Inventories 0.00 0.00 0.00 0.00 0.00
Trade Receivables 0.00 0.00 0.00 0.04 0.00
Cash And Cash Equivalents 1.65 1.54 0.67 2.35 2.43
Short Term Loans And Advances 19.41 17.90 12.44 14.34 14.80
OtherCurrentAssets 2.06 0.97 0.00 0.00 0.00
Total Current Assets 26.49 24.80 13.11 16.73 17.23
Total Assets 27.37 25.76 24.21 29.91 27.62
OTHER ADDITIONAL INFORMATION
CONTINGENT LIABILITIES,

COMMITMENTS
Contingent Liabilities 0.00 0.00 0.00 0.00 0.27
CIF VALUE OF IMPORTS
Raw Materials 0.00 0.00 0.00 0.00 0.00
Stores, Spares And Loose Tools 0.00 0.00 0.00 0.00 0.00
Trade/Other Goods 0.00 0.00 0.00 0.00 0.00
Capital Goods 0.00 0.00 0.00 0.00 0.00
EXPENDITURE IN FOREIGN EXCHANGE
Expenditure In Foreign Currency 0.00 0.00 0.00 0.00 0.01
REMITTANCES IN FOREIGN

CURRENCIES FOR DIVIDENDS
Dividend Remittance In Foreign Currency -- -- -- -- --
EARNINGS IN FOREIGN EXCHANGE
FOB Value Of Goods -- -- -- -- --
Other Earnings -- -- -- -- --
BONUS DETAILS
Bonus Equity Share Capital -- -- -- -- --
NON-CURRENT INVESTMENTS
Non-Current Investments Quoted Market -- -- 5.56 7.45 6.97

Value
Non-Current Investments Unquoted Book
-- -- -- 0.00 0.27
Value
CURRENT INVESTMENTS
Current Investments Quoted Market Value -- -- -- -- --
Current Investments Unquoted Book Value -- -- -- -- --

Cash Flow Statement Analysis S

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CASH FLOW STATEMENT ANALYSIS PARAGON FINANCE LTD

1.2 INDUSTRY PROFILE

1.3 COMPANY PROFILE

SREE VIDYANIKETHAN INSTITUTE OF MANAGEMENT Page 1

What Is a Cash Flow Statement?

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How Cash Flow Statements Work

Cash Flows from Operations

For example, accounts receivable is a noncash account. If accounts receivable go up during a

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operations section can also include accounts payable, depreciation, amortization, and numerous

Cash Flows from Investing

Cash Flows from Financing

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Introduction to financial management:

1. Long term asset mix (investment decisions)

2. Capital mix (financing decisions)

3. Profit distribution (dividend decisions)

4. Short term asset mix (liquidity decisions)

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Meaning and Types of Financial Statements:

1. Income statement (Profit or loss account) &

Nature of Financial Statement:

TECHNIQUES (TOOLS) FOR ANALYSIS AND INTERPRETATION:

The following can be used in connection with analysis interpretation of financial

1. Comparative financial statements.

2. Common measurement statements.

3. Trend percentage analysis.

4. Fund flow statement.

5. Net working capital analysis.

6. Cash flow statement.

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Loan Against Property - Loan Against Property on commercial or residential are

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1. Offline or branch Presence.

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Initially formed as “PARAGON FINANCE AND PLYWOOD INDUSTRIES LTD”, the

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Vision & Mission Statement

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2.1 REVIEW OF LITERATURE

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Sometimes, it is so happens that a business unit earns sufficient

The management of cash also assumes importance because it is difficult to

Meaning of Cash flow:

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“As a statement which summaries sources of cash inflows and outflows of

Objective of Cash flow Analysis:

Applications of Cash Flow Analysis:

2. Determines the ability to pay dividends and other commitments.

3. Shows the relationship of net income to change in the business cash.

4. Efficiency in the cash management.

5. Discloses movement of cash.

6. Discloses success or failure of cash planning.

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7. Evaluate management decisions.