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Perseverance, inspiration and motivation have always played a key role in the success of any venture. Beginning as well as completion of my project report work is greatly attributed in all those who inspired and motivated me, whose wide spread knowledge in the subject and valuable suggestion made m project work really worthwhile. I am greatly thankful to the management of The Sukhjit Starch and Chemicals Ltd. Who give me a permission for industrial training in their company. I have been able to complete the partial fulfillment of the requirements for the Graduate Degree Course of B.Com (Professional) only with the help of my teachers and staff members of Sukhjit Starch and Chemicals Ltd. Which are giving me a proper help regarding the preparation of Project Report. This was not possible without their support and assurance. I am thankful to my guide Mrs.Nidhi Walia for devoting her precious time to solve my problems regarding this project report. I am also thankful to department time to solve my problems regarding this project report. I am also thankful to department of commerce who provide me help. I Convey my sincere thanks to Mr.I.K.Sardana(M.D.), Mr.K.K.Sardana(Jt.M.D.) of the company and also to Mr.V.K.Suri(G.M.Adm.,), Mr.N.K.Kapoor(P.A. to Accounts), Sh.M.G.Sharma(G.M.Finance) who regularly paid attention and monitored the progress of my training. I am also thankful to my parents and friends who encouraged me at every step. I am also thankful to the library staff for extending co-operation. All may not have been mentioned but none is forgotten.

CERTIFICATE-I This is to certify that the Project Report Financial Statement Analysis of The Sukhjit Starch & Chemicals Ltd. Being submitted by Mehak Arora of degree of MBA. to the Deptt. Of Finance for the partial fulfillment

Mrs.Nidhi Walia Deptt.of Finance PIMT, MGG.


This is to certify that the project report entitled as Financial Statement Analysis of The Sukhjit Starch & Chemicals Ltd. Is my own work and all ideas & references have been duly acknowledge.

Mehak Arora MBA IIIrd. SEM.

Finance play a vital role in every aspect of the business, because every enterprise whether big or small needs finance to carry on its operations. In fact, finance is so indispensable that it is rightly said the life blood of an enterprise. Considering this point, I decided to choose the topic of financial analysis which is considered with the financial position of the organization, because it reflects the financial soundness of the company and is a mirror to the health of the business.

As a part of my Degree of MBA (PTU,JAL.), I underwent industrial training of Sukhjit Starch & Chemicals Ltd., Phagwara. During the training period, I was also given a chance to visit the factory premises to know about the practical working of the business. I have studied the financial statements, annual reports of The Sukhjit Starch & Chemicals Ltd., Phagwara. After the financial analysis, I have given some observations relating to my study. The report is presented in the subsequent pages.

CONTENTS 1.CHAPTER 1: INTRODUCTION OF THE ESTABLISHMENT 1. Brief Introduction 2. Historical Background 3. Subsidiary Companies 4. Objectives of the Company 5. Philosophy of the Company 6. Ordinary Rules of the Company 7. Contribution of the Company 8. Organizational Chart 9. Swot Analysis of the Company 10. 5 Ps of the Company 2.CHAPTER II : OBJECTIVE OF STUDY & RESEARCH METHODOLOGY 1. Reasons for Choosing 2. Objective of Study 3. Data Source 3.CHAPTER III : FINANCIAL STATEMENT ANALYSISTHE ORETICAL ASPECTS 1. Meaning & Types of Financial Statement Analysis 2. Meaning & Types of Comparative Statement 3. Meaning & Types of Common-size Statement 4. Meaning & Types & Uses of Cash Flow Statement 5. Meaning & Procedure of Trend Analysis 6. Meaning & Significance of Fund Flow Statement 7. Meaning of Value Added Statement 4.CHAPTER IV :INTERPRETATION & ANALSIS THROUGH VARIOUS FINANCIAL TOOLS 1. Data of Various Statements of Last Five Years. 5.CHAPTER V: OBSERVATION & CONCLUSION. BIBLIOGRAPHY PAGE NO.


BRIEF INTRODUCTION ABOUT The Sukhjit Starch & Chemicals Ltd., Phagwara
1.COMPANY STATUS:Date of Incorporation Date of Commencement Date of conversion in to Joint Stock Company Sector Construction Location Corporate Office Registered Office Branch Office March 15, 1943 April 1, 1943 March 16, 1944 Private Public Co.Ltd.By Shares Sarai Road, Phagwara New Delhi Phagwara Nizamabad

2.BOARD OF DIRECTORS:Sh.V.K.Sardana Sh.I.K.Sardana Sh.K.K.Sardana Sh.S.M.Jindal Sh.S.C.Jindal Sh.A.K.Sardana Sh.Naresh Sardana Sh.S.K.Anand Sh.V.P.Kapahi Chairman Managing Director Jt.Managing Director Executive Director & Secretary Director Director Director Director Director 1

3.REGISTERED OFFICE:Phagwara 144 401 (Pb.)




7.BANKERS:Punjab National Bank, G.T.Road, Phagwara 2

8.AUDITORS:M/S Y.K.Sood & Company Jalandhar

9.MAJOR CUSTOMERS: M/S Nestle Indian Limited Glaxo Limited Consumer Health Care Smith Kline Beacham Limited Britania Industries Limited Hindustan Lever Limited Chittranjan Locomotives Works J.C.T.Limited Jagatjit Industries Limited

10. EXPORT COUNTRIES: Greece Indonesia Iran Egypt Mauritius Russia Denmark 3


There are about 700 personal employed in the Organization which includes all Directors, Management, Supervisor, Clerks & Other administration & Technical staff in the following manner: Whole time directors Dy.General Managers Vice Presidents Gen.Managers Plant Officers Security Staff Administrative Staff Peons All other markers in employees 3 2 2 1 10 42 65 12 401

12.SHAREHOLDING PATTERN:1. 2. Promoters Banks, Financial Institutions, Govt. Institutions etc. Corporate Bodies NRIs/OCBs General Public Clearing Member Total No. of Shares 59.17% 0.02%

3. 4. 5. 6.

1.29% 0.04% 39.44% 0.04% ---------100.00%


The Sukhjit Starch & Chemicals Ltd., Phagwara is a leading company engaged in the production of maize starch liquid glucose, dextrose, monohydrate & other derivatives for the cash more than six decades. Sh.B.K.Sardana, B.D.Sardana and Mr.Agarwal incorporated the company in 1943. Then Sh.Bhagat recently joined the Co. They all were employees of JAGJIT SUGAR MILL of Phagwara. They meet & decided to incorporate the company and they incorporated the company under the name of The Sukhjit Starch & Chemicals Ltd. For the manufacturing of starch by crushing of the maize. This Compan is situated on SARAI ROAD, PHAGWARA. The company was converted into joint stock co. on 16th March,1944. The company have authorized share capital Rs.5 Crore. At the time of establishment of the company it was 4.5 Lacs. The company have subscribed and paid up capital of Rs.368.991 Lacs at present. The company was established with an installed capacity of maize crushing 5 T.P.D. (tones per day). This was increased to 35 T.P.D. during the year 1984-85 which in the subsequent ear increased to 200 T.P.D. During the year 1999-2000 the company has recommended 30% dividends to its shareholders. During the year 1985 the company has set up a similar unit in NIZAMABAD in the state of ANDHRA PRADESH the organization also diversified into other fields as well as VIJOY STEEL AND GENERAL MILLS LTD. Is a wholly owned subsidiary of the Phagwara plant. Which besides complimenting the parent co. by providing necessary engineering infrastructure that is costing fabrication of STARCH MILL & CHEMICAL PLANT It

5 manufactures agricultural equipment for the form rich state of PUNJAB. The co. is to undertake leasing, hire purchase. One another subsidiary company was also incorporated on 8th.October named SCOTT INDUSTRIES LTD. This industry mainly deals with the production and export of readymade garments oriented unit this industry work at village KADIAN,G.T.ROAD,WEST LUDHIANA. The company appears to be the forefront of STARCH INDUSTRIES in the country from the view point of productivity and profitability. Its products are well known for the quality through out the country and abroad.

The Sukhjit Starch & Chemicals Ltd., Phagwara has also started three subsidiary companies they are following:1.VIJOY STEEL AND GENERAL MILL:The company was incorporated in 1945 & is wholly owned subsidiary of Phagwara unit. It provides help to the recent company by supplying necessary engineering infrastructure. It has the business of manufacturing agriculture equipment for the farmers of PUNJA as the state family depends & deals in agriculture. It is an independent manufacturers in having net worth of Rs.2967445.

2.SUKHJIT FINANCE LIMITED:This company was established as on 6th February, 1995 main business of the company includes undertaking leasing, hire purchase financing and other related activities. This subsidiary is having net worth Rs.49500000.

3.SCOTT INDUSTRIES LIMITED:The company has incorporated on 8th. Octorber, 1997. The company has paid up capital of Rs.105,070,000. It has incorporated machinery from JAPAN, CHINA & TAIWAN. It deals in production and export of readymade garments. This company is situated at village KADIAN G.T. ROAD, LUDHIANA. 7


The main objectives of the company are stated in the Memorandum of the company which are as follows: To buy, sell , import, export , manufacture and deal in starch. To dye print or bleach dyers clothes, woolen and other goods & fabrics whether of the company or the customer. To lend money to such persons and on such terms as may see expedient and particular to the customers of the company and to other person having dealings with the company and to guarantee the performance of the contract. To amalgamate with other company having objects altogether or in part similar to those of this company. To carry on transact all kinds of agency business. To fulfill social obligation such as working liberal contribution to various public charitable institutions.

The company has always believed in Good corporate Governance transparency. Fair business and standard corporate practices help the company to maximize longterm shareholders vale and in building a bond of trust with its employees, customers, creditors, leaders and others. The company has always remained prompt in discharging its statutory obligation and duties. The board has constituted various committees of directors from time to time and the meetings of the board and committees thereof have been heed as frequently as 8

the affairs of the company. All the directors attending the board & committee meeting actively participate in the proceeding and decisions are taken unanimously.


THE ORDINARY RULES OF THE COMPANY RELATING TO ITS BUSINESS TRANSACTIONS HAVE BEEN PROVIDED IN THE 60th ANNUAL GENERAL MEETING OF THE MEMBERS OF THE SUKHJIT STARCH CHEMICALS LTD.AT THE REGISTERED OFFICE OF THE COMPANY AT PHAGWARA ON FRIDAY THE 17th DAY OF SEPTEMBER 2005. AT 10.00 AM ARE GIVEN AS FOLLOW:1. To receive, consider and adopt the directors report, auditors report. Audited Balance Sheet and Profit & Loss account for the ear ended 31.3.2004. 2. To declare dividend on equity shares for the year ended 31.3.2004. 3. To appoint director in place of Sh.H.C.Sardana, who retires by rotation and being eligible offers himself for re-appointment. 4. To appoint Director in place of Sh.V.K.Sardana, who retires by rotation and being eligible for re-appointement. 5. To appoint auditors to hold office from the conclusion of this Annual General meeting till the conclusion of the next Annual General Meeting and fix their remuneration. 9


Main products manufactured by the company are:1. Maize Starch 2. Liquid Glucose 3. Liquid Malto Dextrin 4. Dextrose Monohydrate 5. Dextrose Anhydrate 6. Sorbitol 7. Textilose 8. Textilose B 9. Modified Starch 10. White Dextrin 11. Maize Fine Bran 12. Maize Oil Cake 13. Corn Sleep Solid


These contribution of the company are explained as follows:1. It provides donation to various public charitable institutions. It runs three institutions under auspicious two senior secondary schools and one women college i.e. Kamla Nehru College for Women, at Phagwara. 2. The company also provides help both personally and financially to Grievances Committee Phagwara and Hindu Committee Kapurthala. 3. It has also provided valuable help or service to sales tax advisory committee Kapurthala by its members. 11


Joint M.D.

Executive Director




G.M.(Niz.) G.M. (Sale)

Manager Manager (Fin.) (Account)

Manager (Sales)

Assistant Account Officers

Security Supervisor

Time Keeper

Accounts Assistants

Watch & Ward Time Assistant Office Production Sales Manager Assistants

Product Quality Development Control Manager Manager

Workshop Incharge

Plant Supervisor

Plant Supervisor

Electric Incharge

Maintains Engineer





Foreman 12








The Company also enjoys a good credit worthiness and goodwill among its creditors, suppliers customers, bankers as well as shareholders. Labour management relations are very good which are very helpful for the smooth working of an organization Public relations are also good. The company making a liberal contribution to various public charitable institutions it runs three educational institutions in which are two senior secondary school and one women college at Phagwara presently they also open a Public School named as Kamla Nehru Public School, Hargobind Nagar, Phagwara. They are also managing an Anathalaya in the city. They also arrange the smooth supply of fresh water in the nearby one village of Phagwara. Thus, they have a good name and reputation in the society, which is the main reason for choosing Sukhjit Starch & Chemicals Ltd. By me. Now a days Sukhjit starch and Chemicals Limited is marking its mark at international level and is considered to be leading starch industry in the country from the point of view of both profitability and productivity. The reason for choosing Sukhjit Starch and Chemicals Limited for studying my regarding Financial Statement Analysis is that the company provides full help to he trainees during their period of training and give them opportunity to learn more practically. Another reason for choosing the company is that it is Well-reputed Oldest and famous company in India. It appears to be on fore-front of the starch industry in the country from the point of view of quality. 14

Specifically the objectives of my study can be numbered as follows:1. To analyze he basis to access he working capital requirements of The Sukhjit Starch & Chemicals Ltd., Phagwara. 2. To analyze the profitability, Liquidity position of the company. 3. To analyze the means for financing the position of the company. 4. To analyze management of cash, inventory and receivables of Sukhjit Starch and Chemicals Limited in brief. 5. To know the companys efficiency in utilizing its current and fixed assets. 6. To know companys ability to meet short term or current obligations. 7. To have comparative view over its business financial position measuring changes in composition and figures of various assets & liabilities. 8. To know efficiency of concern in utilizing resources. 9. To analyze the operational efficiency.


For the purpose of completion of my project. I have taken data from two sources which are explained as below:1. Primary sources. 2. Secondary sources.

1.PRIMARY SOURCES:- Primary sources are those which are used for the time. The
soures which have come into existence for the purpose of said and it is an expensive and time consuming source of getting information. I have consulted with finance manager N.K.Kapoor (P.A. to G.M.), Major V.K.Suri for the purpose of collecting information by primary source.

2.SECONDARY SOURCES:-Secondary sources are those which are already into

existence for some other purpose. IN other words, we can say the source other than primary source are known as secondary source. The secondary source which are used by me are: a. Annual Report b. Published Accounts c. Different Periodicals I have also gone through the literate of financial analysis from different financial books.



FINANCIAL STATEMENT ANALYSIS MEANING OF FINANCE:- Finance may be defined as the provision of money at
the time when it is require. All kinds of enterprise need finance to carry on its operations and to achieve its targets. Finance can rightly be regarded as the lifeblood of an enterprise as without adequate finance no enterprise can possibly accomplish its objective.


Financial statements are the sources of information

on the basis of which conclusions are drawn about the profitability and financial position of a concern. They are major means employed by firm to present their financial situation to owners, creditors and the general public.

Thus the term Financial Statements generally refers to 2 statements:

I. The position statement of the balance sheet; and II. The income statement of the profit and loss account

Acc. To John Myer,

The financial statements provide a summary of accounts of a business enterprise, the balance sheet reflection the assets, liabilities and capital as on a certain date the income statement showing the results of operations during a certain period. Robert N. Anthony defines financial statements as, interim reports, presented annually and reflecting a division of the life of an enterprise in to more or less arbitrary accounting period period-more frequently a year 17


Financial statements provided only a summarized view of financial position and operations of firm. They are not much useful in understanding the strategic aspects of the information provided herein. However, information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. Financial Statements analysis is the process of identifying the financial strengths and weaknesses of the firm by establishing strategic relationship between the items of the balance sheet, profit and loss a/c and other operational data. The focus of financial analysis is on key figures in the statements and the significant relationships that exist between them so as to make analysis judgment about the profitability and financial soundness of the firm.

According to Metcalf and Titard

Financial Statement parts of a financial statement to obtain a better understanding of a firms position and performance.

Following steps are followed while making financial statement analyses: To select the information relevant to the decision under consideration from the total information contained in the financial statement. To arrange information in a way to highlight significant relationship: Interpretation and drawing of inferences and conclusions. In brief financial statement analysis is the process of selection ,relation and evaluation.



Financial analysis can be classified in to different categories depending upon:1. The material used, and 2. Method of operation followed or modus operandi of analysis


Financial Analysis can be classified in to different categories depending upon:I. The material used, and II. Method of operation followed or Modus operandi of analysis


On the basis of Material Used

On the basis of Modus Operandi

External Analysis

Internal Analysis

Horizontal Analysis

Vertical Analysis

ON THE BASIS OF MATERIAL USED (a) External Analysis :- External analysis is one, which is done by
outsiders having no access to the detailed accounting records of business firm. Published accounts of the firm are used to draw relevant information about limitations of information provided in financial statements.


(b) Internal Analysis :- Financial Analysis done by persons engaged

in the working of an organization is termed as internal analysis. Executives, employees or the govt. agencies that have statutory power vested in them can perform it.

ON THE BASIS OF MODUS OPERANDI (a) Horizontal analysis :- Horizontal analysis also known as
Dynamic analysis is based on the data from year to year rather than on data of any one year. It makes it possible to focus attention on items that have changed significantly during the period under review. Comparison of an item over several period with a base year may show a trend developing.

(b) Vertical analysis :- Vertical analysis also known as static

analysis involves the statements of one of one accounting year with a base item selected from the same years statement. Common-size financial statements and financial ratios are two tools employed to vertical analysis.


A number of Methods or devices are used to study the relationship between different statements. Some of important techniques used are as follow: Comparative Statements Common-size Statements Cash flow Analysis Trend Analysis Fund Flow Analysis Value Added Statement

20 Tools/Techniques of Financial analysis

Comparative Statements

Common-size Statements

Cash flow Analysis

Trend Analysis

Fund Flow Analysis

Value Added Statement

The comparative financial statements are the statement of financial position at different periods of time; where the various elements of financial position are shown in a comparative from so as to give on idea of financial position at 2 or more periods. From practical point of view generally, two financial statement i.e. balance Sheet & Income Statement are prepared in comparative from for analysis purpose. The comparatives statement show: Absolute figures Changes in financial figures i.e. increase or decrease in absolute figures Absolute data in terms of percentages. Increase or decrease in terms of percentages

However, it must always be remembered that financial data will be comparative only when same accounting principles are used in preparing these statement. In case of any deviation, the fact must be mentioned at the foot financial statement and a careful analysis should be made.



The comparative balance sheet shows the items of balance sheets of two or more years in comparative form, enabling the analyst to from an opinion about the progress of an enterprise. The comparative balance sheet has four columns-two for the data of original balance sheets, one showing absolute changes in items (increase/decrease), one for giving the values of % of increase or decrease.


Comparative Income Statement provides a cooperative view of items of revenues and expenditures of 2 or more financial years. It enables the analyst to judge the relative changes in the profitability of company.


The common-size statement are shown in analytical percentages. The figures are shown as percentage of total assets total liabilities and total sales, the total assets/total liabilities or sales as the case may be are as taken 100 and different items of balance sheet and profit and loss a/c (as the may be) are expressed as % of total. Thus, the analyst is able to assess the figures in relation to total value. The common size statement may be prepared in the following way: 1) 2) Take the total assets/Liabilities/sales as 100; Calculate percentages of various items in relation to total.

Common-size statement can also be prepared for balance sheet and profit & loss a/c. Thus, we can have common-size balance sheet and common-size profit & loss a/c.

COMMON-SIZE BALANCE SHEET:A statement, in which Balance Sheet items are expressed as the ratio asset to total asset & each liability to total liability is called common size balance sheet. Such a statement can be used to compare companies of differing size. The comparison of figures in different periods is not of much use because total figures may affected by a number of factor. It is not possible o establish standard norms for various assets Even the trend percentages may give misleading result. In such circumstances, common-size statement is the best tool in the hands of analyst.

COMMON-SIZE INCOME STATEMENT:The items income statement can be shown as & sales to shown the relation of each item to sales. A significant relationship can be established between items of income statement

and volume of sales. This statement is very helpful in evaluating operational efficiency of the enterprise. 23


Cash Flow Statements is one of the must useful techniques to analyze the cash position of a concern. Cash Plays a very important role in the entire economic life of a business. Sometimes business enterprise face cash crisis even having sufficient profits. Thus, the movement of cash is of vital importance to the management. A cash flow statement is prepared to study the flow of cash in an organization. It is a statement, which describes the inflows (source) and outflows (uses) of cash and cash equipments in an enterprise during a specified period of time. Such a statement enumerates net effects of the various business transactions on cash and its equivalents and takes in to account receipts and disbursements of cash. A cash flow statements summarizes the cause of changes in cash position of a business enterprise between dates of two balance sheets. According to As-3 (revised), an enterprise should prepare statements are prepared.


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 flow are classified in to three main categories: 1) 2) 3) Cash flows from operating activities Cash flows from investing activities Cash flows from investing activities

1) Cash Flows From Operating Activities:- Operating activities are the principal
revenue generating activities of the enterprise and other activities that are not investing or financing activities. The amount of cash flows arising from operating activities is a key

indicator of the extent to extent to which the operations of enterprise have generated sufficient cash flows to maintain the operating capability of the enterprise. 24

Examples of cash flows from operating activities are: Cash receipts from the sale of goods and the rendering of services. Cash receipts from royalties, fees, commission and other revenue. Cash payments to suppliers of goods and services. Cash payments or refunds of income taxes unless they can specifically be identified with financing and investing activities etc;

2) Cash flows from Investing activities are: Cash payments to acquire fixed assets. Cash payments to acquire shares, warrants, or debt instruments of other companies and interesting joint ventures. Cash receipts from disposals of shares, warrants, or debt instruments of other companies and interest in joint venture. Cash advances and loans made to third parties(other than advances and loans made by a financial institution). Cash receipts from the repayment of advances and loans made to third parties(other than advances and loans of a financial enterprise); Cash payments or receipt from future contracts, forward contracts, opinion contracts, and swap contracts except when the contract are held for trading or dealing purposes, not where they are classified as financing activities.

3) Cash flows From financing Activities:- Financing Activities are activities that
result in change in the size and composition of the owners capital and borrowings of the enterprise. The separate disclosure of cash flows of cash flows arising from financing

activities is important because it is useful in predicting claims on future cash flows by providers of funds. 25

Examples of cash flows from investing activities are:

a. Cash proceeds from issuing shares and other similar instruments; b. Cash proceeds from issuing debentures, loans, note, and other short term or long term borrowings; and c. Cash repayments of amounts borrowed such as redemption of debentures, bonds and preference shares.


A cash flow statement is of primary importance to the financial management. It is an essential tool of short-term financial analysis. Its main uses are as follows: 1. Cash flow statement facilitates to prepare sound financial policies. It also helps to evaluate the current cash position. 2. A projected cash flow statement can be prepared in order to know future cash position of a concern so as to enable a firm to plan and coordinate its financial operations properly. 3. It helps the managements in taking short-term financial decisions. 4. Cash flow statements provides information of all activities classified under operating investing and financing activities. 5. Cash flow statement prepared according to AS-3 (revised) is more suitable for making comparisons than the fund flow statement, as there is no standard format used for the same. 6. Cash flow analysis is more useful and appropriate than funds flow analysis for short-term financial analysis as in a very short period it is cash which is more

relevant than the working capital for forecasting the ability of firm to meet its immediate obligations. 26

7. It better explain the cause for poor cash position in spite of substantial profits in a firm by throwing light on various applications of cash made by firm.

Trend Analysis
One of the techniques of financial analysis is trend analysis. Trends of series of information of a concern may be development easily in order to analyze the financial statements of a particular concern. Trends Show the upward or downward directions in figures of a particular item (may be of profit & kiss a/c or of balance sheet) by establishing the percentage relationships with the figures of base year. Usually the figures of base year taken as 100 and trend ratios for other years are calculated on basis of base year.

PROCEDURE FOR CALCULATING TRENDS:1) Select a base year. Generally, the first or last year is taken as base year. 2) Taken the figures of base year as 100 for comparison purpose. 3) Calculate trend percentages in relation to base year.



Funds Flow Statements is a method by which we study changes in the financial position of a business enterprise between beginning and ending financial statement dates. It is a statement showing sources and uses of funds for a period of time. Funds Flow Statements is a statement which indicates various means by which the funds have been obtained during a certain period and the ways to which these funds have been used during that period. The term Funds used here means working capital that is the excess of current assets over current liabilities. The term Flow means movement and includes both inflow and outflow. The term Flow of Funds means transfer of economic values from one asset of equity to another. The flow of funds occurs when a transaction changes on the one hand a non current account and on the other a current account and vice-versa. If any transaction results in the increase in funds, it is said to be an application or outflow of funds.

The Significance of funds flow statement can be well followed from its various uses given below: 1. It helps in the analysis of financial operations. 2. It throws light on many perplexing questions of general interest which may be otherwise difficult to be answered such as:


Why were the net current assets lesser in spite of higher profits and vice-versa? Why more dividends could not be declared in spite of available profits? What happened to the net profit? Where did they go? What happened to the proceeds of sale of fixed assets or issue of shares, debentures, etc.?

How was the increase in working capital financed and how will it be financed in future?

3. It helps in the formation of realistic dividend policy. 4. It helps in the proper allocation of resources. 5. It acts as a future guide. 6. It helps in appraising the use of working capital. 7. It helps knowing the overall credit worthiness of a firm.



Value added is a basic and important measurement to judge the performance of an enterprises. The origin of this concept in the field of accounting may be traced back to the year 1975 when the Accounting Standards Steering commission in U.K. has stressed the inclusions of value added in the corporate Annual Report. The corporate report (issued in July 1995) recommended and concluded that there is a need for s Statement reports the operating performance of a company at a given point of time using both accrual and matching procedures The concept of value added has a direct linkage with the concept of Social Responsibility. The value added statements is a rearrangement of information contained in the income statement.

Acc. To David Pendrill: The statement which shows the income of the as an entity and how that is dividend between the people who have contributed to its creation.

Generation of value added:

The value added is the increase in the market value brought by an alteration in the form location or availability of a product or service excluding he cost bought is materials on service used in that product or service.

Application of Value Added:

The value added is shared by the three contributing members are (i) Employees (ii) Government (iii) Providers of capital. The reminder of the value added is reinvested in business in the form of depreciation and retained profits.

I. Value added statement is no substitute but a supplement to the income statement. II. It is based on items and figures obtained in the income statement and accounting concept remain the same in the preparing value added statement. III. It is different from the income statement to an extent, the latter contains the nonvalue added debits and credits like provisions, non-trading losses, appropriations etc.