Ali Baig Funds Flow

Funds Flow Statement Analysis
Sri Sesha Sai Spinning Mills Page 1

Contents
INTRODUCTION............................................................................................................5
FUNCTIONS OF FINANCIAL MANAGEMENT..........................................................6
MEANING OF FUNDS................................................................................................7
Fund:................................................................................................................................7
According to the dictionary meaning of the term Funds implies an accumulation or
deposit of resources from which supplies are may be drawn a more or less permanent
store or supply. It is also defined as available pecuniary resources but these two
meanings are abroad in nature and apt to macro level planning and control. A number of
definitions of the term fund have been given.................................................................7
Some people call fund as cash. But it is seen in practice that the current assets are
constantly circulating through cash account in business operations and many
transactions affect flow of cash at least later or sooner.....................................................7
Meaning of Flow of Funds............................................................................................7
The term flow means movement and includes both inflow and out flow. The term
flow of funds means transfer of economic values from one asset of equality to another.
Flow of funds is said top have taken place when any transaction makes changes in the
amount of funds available before happening of the transaction.......................................7
OBJECTIVE OF STUDY.............................................................................................8
NEED FOR STUDY.........................................................................................................8
SCOPE OF THE STUDY.................................................................................................9
RESEARCH METHODOLOGY......................................................................................9
Research Design................................................................................................................9
Period of study:...............................................................................................................10
The analyze presented in the study are Annual Reports of M/S Sri Sesha Sai Spinning
Mills, Hyderabad from 2010-2011 to 2014-2015...........................................................10
LIMITATIONS................................................................................................................10
PARTIES INTERESTED IN FINANCIAL ANALYSIS................................................12
Internal Users..............................................................................................................12
External Users.............................................................................................................13
Significance of Financial Analysis..................................................................................14
Significance of Funds Flow Statement.......................................................................14
Types of analysis.............................................................................................................19
Methods of Analysis........................................................................................................21
Comparative Statement Analysis....................................................................................21
Common-size Statement Analysis..................................................................................21
Users of Financial Analysis.............................................................................................24
Management:.................................................................................................................25
Funds Flow Analysis.......................................................................................................25
MEANING AND CONCEPT OF FUNDS..................................................................26
Fund:..............................................................................................................................26



INTRODUCTION
A funds flow statement is a technical device designed to analyze, the
changes in the financial condition of a business enterprise between two years. It is also
called as a statement of sources and applications of funds. The funds flow statement is
becoming popular with the management because it not only helps them in analyzing
financial operations, providing basis for comparison with budgets, and serving as a tool
of communication, but also explains the financial consequences of such operations such
as the reason why the company is experiencing difficulty in making payments to
creditors or why the bank balance is getting thinner.
There is a general recognition in industry and business and among
professional accounting bodies that financial statements should provide relevant
information which sub serves the multiple objectives of shareholders, investors,
creditors, customers and the public and which enable them to arrive at rational
economic decisions. Normally what the shareholders look for in these statements is an
account of the stewardship of the firm and the amount which may be expected as
dividend. Potential investors look upon funds flow statements as the source of there
realistic view of the value of a companys shares in terms of an expected futures stream
of distribution and judge the efficiency of the management accordingly.

FUNCTIONS OF FINANCIAL MANAGEMENT

The financial functions can be divided into four broad categories:
1. Investment decisions.
2. Financing decisions.
3. Dividend decisions.
4. Liquidity decisions.
1. Investment decision
Investment decision or capital budgeting involves the decision of allocation of
capital or commitment of funds to long-term assets, which would yield, benefits in
future. Its one very significant aspect is the task of measuring the prospective
profitability of new investments. Future benefits are difficult to measure and cannot be
predicted with certainty.
2. Financing decision:
Financing decision is the second important function to be performed by the
financial manager. Broadly, he must decide when, where and how to acquire funds to
meet the firms investment needs. The central issue before him is to determine the
proportion of equity and debt. The mix of debt and equity is known as the firms capital
structure. The firms capital structure is considered to be optimum when the market
value of shares is maximized.
3. Dividend decision:
Dividend decision is the third major financial decision. The financial manager
must decide whether the firm should distribute a portion and retain the balance. Like the
debt policy, the dividend policy should be determined in terms of impact on the
shareholders value. The optimum dividend policy is one, which maximizes the market
value of the firms shares.
4. Liquidity decision:
Current assets management, which affects a firms liquidity, is an important
finance function. Current assets should be managed efficiently for safe guarding the
firm against the dangers of liquidity and insolvency. Investment in current assets affects
firms profitability, liquidity and insolvency. Investment in current assets affects firms

profitability, liquidity and risk. A conflict exists between profitability and liquidity
while managing current assets.
Financial analysis is the process of identifying the financial strengths and
weaknesses of the firm. It is done by establishing relationships between the items of
financial statements viz., balance sheet and profit and loss account. Financial analysis
can be undertaken by management of the firm or by parties outside the firm viz.,
owners creditors, investors and others.
MEANING OF FUNDS
Fund:
According to the dictionary meaning of the term Funds implies an
accumulation or deposit of resources from which supplies are may be drawn a more or
less permanent store or supply. It is also defined as available pecuniary resources but
these two meanings are abroad in nature and apt to macro level planning and control. A
number of definitions of the term fund have been given.
Some people call fund as cash. But it is seen in practice that the current
assets are constantly circulating through cash account in business operations and many
transactions affect flow of cash at least later or sooner.
Meaning of Flow of Funds
The term flow means movement and includes both inflow and out
flow. The term flow of funds means transfer of economic values from one asset of
equality to another. Flow of funds is said top have taken place when any transaction
makes changes in the amount of funds available before happening of the transaction.

OBJECTIVE OF STUDY
1) Helpful in planning.
2) Helpful in organizing.
3) Helpful in interpreting financial information.
4) Helpful in making decision
5) Report to management.
NEED FOR STUDY

1. To study the financial statements of Sri Sesha Sai Spinning Mills for the period
of 5 years.
2. To analyze how Sri Sesha Sai Spinning Mills is utilizing its resources.
3. To analyze the changes in assets and liabilities from the end of one period of the
time to the end of another period of time
4. To find out the sources from which additional funds were derived and the use to
which their sources were put.

SCOPE OF THE STUDY

The present study focuses as sources funds and application of funds for a period
of time. The study is confirmed to find out the changes in the financial position of Sri
Sesha Sai Spinning Mills between the beginning and ending financial Year. It is a
technical device designed to analyze the changes in the financial condition of the
business enterprises between two dates.
This funds flow statement 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 the period.
RESEARCH METHODOLOGY
Research is a process in which the researcher wishes to find out the end result for a
given problem and thus the solution helps in the future course of action. Redman and
Mory defines research as a systematized effort to gain new knowledge.
Research Design
A research design is the arrangement of conditions for collection and analysis of
data in a manner that aims to combine relevance to the research purpose with company
in procedure. In fact, the research design is the conceptual structure within which
research is conducted; it constitutes the blue print for the collection, measurement and
analysis of data.

Sources of Data:
The data was collected through primary and secondary sources.
Primary Data:
First hand information was collected using the direct personal interview.
Interaction with guide to understand the general & specific aspects regarding
utilization of resources.
Secondary Data:
Annual reports collected from the M/S Sri Sesha Sai Spinning Mills,
Hyderabad.
Period of study:
The analyze presented in the study are Annual Reports of M/S Sri Sesha Sai
Spinning Mills, Hyderabad from 2010-2011 to 2014-2015
LIMITATIONS
It should remember that a funds flow statement is not a substitute of an income
statement or a balance sheet. It provides only some additional information as
regards changes in working capital
The study based on the available annual reports and internal information of
Sri Sesha Sai Spinning Mills only.
It cannot reveal continuous changes.


PARTIES INTERESTED IN FINANCIAL ANALYSIS
There are different parties interested in the financial analysis of these
statements. But their aim and objective of the analysis differ significantly. The users of
the financial statements can be divided into two broad groups:
(a) Internal users
(b) External Users.
Internal Users
Financial Executives:
The first party interested in the financial statement analysis is the Finance
Department of the company itself. This analysis helps the Financial Manager to have a
deep insight into the financial condition of the enterprise.
Top Management:
The Top Management of the concern is also interested in the analysis of
financial statements. It helps them in reaching conclusion on the following:
Is the firm in a position to meet its current obligations?
What sources of long-term finance are employed by the firm?
How efficiently does the firm use its assets?
Are the earnings of the firm adequate? etc.,

External Users
Investors:
Those who are interested in buying the shares of a company are naturally
interested in the financial statements to know how safe the investment already made is
and how safe the proposed investment will be.
Creditors:
Lenders are interested to know whether their loan, principal and interested will
be paid when due. Suppliers and other creditors are also interested to know the ability
of the firm to pay their dues in time.
Workers:
In our country, workers are entitled to payment of bonus which depends on the
size of profit earned. Hence, they would like to be satisfied that the bonus being paid to
them is correct.
Customers:
They are also concerned with the stability and profitability of the enterprise.
They may be interested in knowing the financial strength of the company to take further
decisions relating to purchase of goods.
Government:
Financial analysis helps government in knowing the role and status of industry
in general and companies in particular in framing Macro-Economic policies.

Researches:
The financial statements, being a mirror of business conditions, are of great
interest to scholars understanding research in Accounting theory as well as business
affairs and practices.
Significance of Financial Analysis

Analysis of financial statement is carried out to measure the enterprises
liquidity, profitability, solvency and other indicators to assess its operating efficiency,
financial position and performance. Financial analysis serves the following purpose:
To know the operational efficiency of the business.
Helpful in measuring the solvency of the firm.
Helpful in comparison of past and present results.
Helps in measuring the profitability.
It is more helpful in inter-firm comparison.
Helps in judging the solvency of the undertaking.
Significance of Funds Flow Statement
The funds flow statement is an important tool of financial analysis. The utility of
the funds flow statement items from the fact that it enables management,
shareholders, investors, creditors and other interested in the enterprise to
evaluate the uses of financial policies of the management.
1.Decisions relating to financing:

With the people of the funds flow statement the analyst can evaluate the
financing patterns of the enterprise. An analysis of the major sources of
funds in the past reveals what portion of the growth was financed internally
and what portion externally. The statement is also meaningful in judging
whether the company has grown at too fast a rate, credit has increased at
relatively higher rate, one would wish to evaluate the consequences of
slowness in the trade payments on the credit standing of the company and its
ability to finance in future.
2.Decision on capitalization:
The funds flow statement serves as handmaid to the finance manager in
deciding the makeup of capitalizations. Estimated uses of funds for new fixed
assets working capital, dividend, and repayment of debt are made for each of
several future years. Estimates are made of the funds to be provided by
operations, and the balance must be obtained by borrowing or issuance of new
securities, if the indicated amount of new funds required is greater than what the
finance manager thinks possible to raise, then plans for new fixed assets
acquisition and the dividend policies are re-examined so that the uses of funds
can be brought into balance with the anticipated sources of financing them. In
particular funds statements are very useful in planning intermediate and long
term financing.
1.Reveals the reasons for financial difficulties:

The funds flow statement reveals clearly the cause for the financial difficulties
of the company. The difficulties may be due to improper mix of short and long

term sources, un necessary accumulation of inventory of fixed assets etc., These
can be found out by a careful study of the funds flow statement.
2.Others uses:
Funds Flow Statement is useful to the management in following cases.
a) Estimating the amount of funds needed for growth;
b) Improving the rate of income on assets;
c) Planning the temporary investment of idle funds;
d) Securing additional working capital when needed ;
e) Securing economies in the centralized management of cash in organisation
whose management is decentralized;
f) Planning the payment of dividend to shareholders and interest to creditor and
Useful as control device:

The funds flow statement also serves as a control device in that the statement
compared with the budgeted figures will show to what extent the funds were put to
use according to plan. This enables the finance managers to find out deviation from
the planned course of action and take remedial steps to correct the deviations.
Useful to the external parties:

The outside parties can have a clear knowledge about the financial policies that
the company has persuade. In the light of the information so supplied by the
statement the outsiders can decide whether or not to invest in the enterprise and on

what terms funds have to be invested. The funds statement provides an insight into
the financial operations of a business enterprise an insight immensely valuable to
the finance manager in analyzing the past and future expansion plans of the
enterprise and the import of these plans an its liquidity. He can detect imbalances in
the issue of funds and undertake remedial actions.
Thus, the funds statement draws the attention of finance manager to problems
which call for detailed analysis and immediate action. In view of these funds flow
statement is becoming more popular with management. Even some bank managers
make it obligatory for the borrowers to furnish a funds statement along with their
annual balance sheet now a days many Indian companies are publishing this
statement in their annual reports although they are not obliged to do so under the
companies Act.
Limitations of financial analysis:

Every coin has two sides. Same is the case with analysis of financial statement.
Although this analysis has much significant and usefulness yet it has certain
limitations. Financial analysis may not provide exact answers to these questions but
it does indicates what can expected in the future. The limitations of financial
analysis are given below.
1. Historical data: Analysis of the financial statements indicates about the
performance of the business in the preceding periods. It does not indicates the
present position of the business. Financial statements are prepared on historian
facts and not throw light on the current and present position of the business.

2. Lack of standard terminology: Accounting is not an exact science. It
does not universally accepted terminology. Different meanings are given to a
particular term. These are different methods of providing depreciation. Interest
may be charged on different rates. In this way, there is sufficient possibility of
manipulation and the financial statements have suffer. As a consequence
financial analysis also proves to be defective. However, in the recent past the
International Accounting Board is taking active interest and taking measures for
standard sing the accounting terminology as well as bringing standards for bring
informing in accounting system.
3. Affects of price level changes: The results shown by financial statements
may be misleading, if price level changes havent been accounted for. The ratio
may improve with the increase in price, where as the actual efficiency may not
improve. Ratios on the two years will not be meaningful for comparison, it the
prices of commodities are different. Changes in price affects cost of production,
sales and value of assets and as a consequence comparability of suffers.
4. Non-consideration qualitative aspects: Financial analysis does not
measure the qualitative aspects of the business. It does not show the skill,
technical knowhow and the efficiency of its employees and managers. It is the
qualitative measurement of the performance. It means that analysis of financial
statements measures only one sided performance of the business. It completely
ignores human resources.
5. Mis leading results: Results shown by financial analysis may be misleading
in the absence of absolute data. For example, the analysis of one firm revels that
the increase in profits form Rs.20,000 to Rs.80,000 shows that the profit has

increased by four times. In case of another firm the analysis reveals that the
profit of this firm also increased for Rs.100 crores to Rs.400 crores, showing
fourfold increase. But this analysis ignored the size of the firms. As such, the
results may mislead.
6. Financial Statements and Funds Flow Statement:

Financial statement means the profit and loss account and the balance sheet. All
the organizations more particularly, the company from of organizations is required
to present the annual financial statements every year. The financial statements differ
with the funds flow statement in many ways.
A Funds Flow Statement is a statement measuring the inflows the inflows and
outflows of net working capital that result from any type of business activity
between two dates. An Income statement is a statement measuring the inflows and
outflows of net assets of revenue nature that result from rendering goods on services
to customers between two dates.
A Funds Flow Statements has become a useful tool in the hands of financial
analyst. That is because the financial statements i.e., Income statement measures the
flows restricted to transaction relating to rendering of goods and services to
customers. It is not capable of any accurate information of the resources from
operating unless the income data is converted into funds data. It does not depict the
major financial transactions which have resulted in changes in Balance Sheet.
Types of analysis
Two types of analysis are undertaken to interpret the position of an enterprise.
They are:

Vertical Analysis
Horizontal Analysis
The Companies Act, 1956 permit the companies to present the financial
statements in vertical as well as horizontal form.
Vertical Analysis:
It is the analysis of relationship as between different individual components for
a given period of time. Comparison of current assets to current liabilities or comparison
of debt to equity for one point of time is the examples of vertical analysis. It can be
made in the following ways.
By preparation of common size statements of the two similar units.
By preparing common size statement of different years of the same
business.
Horizontal Analysis:
It is the analysis of changes in different components the financial statements
over different periods with the help of a series of statements. Study of trends in debt or
share capital or their relationship over the past ten years period or study of profitability
trends for a period of five years or ten years are examples of horizontal analysis. It
comprises:
Comparison of the financial statements of different years of the same
business unit.
Comparison of financial statement of a particular year of different
business units.

Methods of Analysis
A financial analyst can adopt the following tools for analysis of the financial
statements. These are also termed as Methods of Financial Analysis.
Comparative Statement Analysis.
Common-size Statement Analysis.
Trend Analysis.
Funds flow Analysis.
Cash flow Analysis.
Ratio Analysis.
Comparative Statement Analysis

Comparative financial statements are those statements which are designed to
provide time perspective to the consideration of various elements of financial position
embodied in such statements. In these statements figures for two or more periods are
shown side by side to facilitate comparison. Both the income statement and balance
sheet can be prepared in the form of comparative financial statements.
Common-size Statement Analysis

Common-size statement is a financial tool of studying key changes and trends in
financial position of a company. In common-size statement, each item is stated as
percentage of the total of which that item is a part, each percentage exhibits the relation
of the individual item to its respective total. Therefore, the common-size percentage

method represents a type of ratio analysis. That is why this statement is also designated
as component percentage or 100 percent statement. Preparation of the common-size
statement involves two steps:
State the total of the statement as 100 percent.
Compute the ratio of each item to the total in the statement
There are two types of common-size statements, viz., common-size income
Statement and Balance Sheet.
Trend Analysis:
Trend analysis depicts behavior of the ratios over a period of time and the trends
in the operation of the enterprise. The trend figures are index figures giving a birds eye
view of the comparative data by presenting it over a period of time. This is horizontal
analysis of financial statement, often called as Pyramid Method of Ratio Analysis a
guide to yearly changes.
Under this form of analysis, generally financial ratios are studied for a specified
number of years. It is a dynamic analysis depicting the changes over a stated period.
The working of trend analysis involves the following three steps:
Selection of the base year.
Assignment of an index number of 100 to each item of the base year.
Calculation of percentage relationship that each item bears to the
same item in the base year

Ratio Analysis:
Ratio Analysis is powerful tool of financial analysis. The relationship between
two accounting figures, expressed mathematically, it is known as a financial ratio. In
financial analysis, a ratio is used as a benchmark for evaluating financial position and
performance of a firm. Ratios help to summarize large quantities of financial data and to
make qualitative judgment about the firms financial performance.
Several ratios, calculated from the accounting data, can be grouped into various
classes according to financial activity or function to be evaluated. In view of the
requirements of the various users of ratios.
We may classify them into the following categories:
Liquidity Ratios.
Leverage Ratios.
Activity Ratios.
Profitability ratios.
Financial analysis is the processes of identifying the financial strengths and
weaknesses of the firm by properly establishing relationships between the items of
financial statements viz., Balance sheet and profit and loss account, financial analysis
can be undertaken by management of the firm or by parties outside the firm, Viz.,
Owners, Creditors, Investors and others.

Users of Financial Analysis

Financial analysis is the process of identifying the financial strengths and
weakness of the firm by properly establishing relationship between the items of the
Balance Sheet and the Profit and Loss Account financial analysis can be under taken by
management of the firm of by parties outside the firm viz., Owners, Creditors, Investors
and others. The nature of analysis will differ depending on the purposes of the analyst.
Trade creditors:
Trade creditors are invested in firms ability to meet the climes over very short
period of time. Their analysis therefore, confine to the revolution of the firms liquidity
position.
Suppliers of long term debt:
On the other hands are concerned with the firms long term solvency and
survival. They analyze the firms profitability over time its ability to generate cash to
be able to pay interest and repay principle and the relationship between various courses
of funds.
Investors:
Who have invested their money in the firms shares are must be concerned about
the firms earnings. They restore more confidence in those firms. That show study

growth in earnings as such they concentrate analyzing the firms present and future
profitability.
Management:
Management of the firm would be invested in every aspect of the financial
analysis. It is their over all responsibility to see that the resources of the firms are used
most effectively and efficiently and that the firms financial condition is sound.
Funds Flow Analysis

Significant technique of financial analysis is FUNDS FLOW ANALYSIS. It is
designed to highlight changes in the financial condition of a business concern between
concern between two points of time which generally conform to beginning and ending
financial statement dates.
Thus, Funds Flow Statement is a report which summarizes
the events taking between the two accounting periods. It spells out the sources from
which funds were derived and the uses to which these funds were put. This statement is
essentially derived from an analysis of which these have occurred in assets and
liabilities items between two balance sheet dates. In this statement, only the net changes
are shown so that the outcome of a transaction upon the financial condition of a
business enterprise reflected more sharply.

MEANING AND CONCEPT OF FUNDS
Fund:
According to the dictionary meaning of the term Funds implies an
accumulation or deposit of resources from which supplies are may be drawn a more or
less permanent store or supply. It is also defined as available pecuniary resources but
these two meanings are abroad in nature and apt to macro level planning and control. A
number of definitions of the term fund have been given.
Some people call fund as cash. But it is seen in practice that the current
assets are constantly circulating through cash account in business operations and many
transactions affect flow of cash at least later or sooner.
For example, the sale of goods on credit increases in accounts payable rather
than in an immediate cash flow. Similarly, certain expenses may result in a current
liability since they might not have been paid immediately. In other words, it may be
said that any current assets and current liability has its impact on working capital (as
working capital is the difference of current assets and current liabilities) rather than
cash. Therefore there is another view about meaning of fund that it means working
capital.
The term funds have been defined in a number of ways.
In a Narrow Sense:
It means cash only and a funds flow statement prepared on this is called a cash
flow statement. Such a statement enumerates net effects of the various business
transactions on cash and takes into account receipts and disbursements of cash.

In Broader sense:
The term Funds refers to money values in whatever from it may exist here Funds
means all means all financial resources used in business whatever in the firm of men,
material, money, machinery and others.
In a Popular Sense:
The term Funds means working capital i.e., the excess of current assets over current
liabilities. The working capital concept of funds has emerged due to fact that total
resource of a business are invested partly in fixed assets in the form of fixed capital and
partly kept in firm of liquid of near liquid form as working capital.
In any business we cannot under estimate the flow of funds from two operations.
The business runs with funds but the organization knows how much important the flow
of funds is.
The Funds Flow Statement is concerned with sources and applications of
organization.
Statement of changes in working capital shows the increase or decrease in
working capital.
Funds from Operation statement shows how much funds from operations.
IMPORTANCE OF FUNDS FLOW ANALYSIS:
The importance of funds Flow analysis and ratio analysis in all undertakings
needs no emphasis.
How is it managed? What are the practices adopted? What are the problems
faced?

This study is an attempt to answer the questions. This is considered to M/S. Sri
Sesha Sai Spinning Mills, Hyderabad.
Funds Flow Statement, Income Statement and Balance Sheet:
Funds Flow Statement is not a substitute of an income statement i.e., a Profit
and Loss Account, and a Balance Sheet. The Profit and Loss Account is a document,
which indicates the extent of success achieved by a business in earning profits.
A balance sheet is a statement of financial position or status of business on
given date. It is prepared at end of accounting period. The balance sheet depicts various
resources of an understanding and the deployment of these resources in various assets
on a particular date. As it indicates the financial condition on a particular date, it is
static in nature; while funds flow statement is a dynamic one.
Funds Flow Statement tells us many financial facts, which a balance sheet
cannot tell. Balance sheet does not disclose the cause for change in the assets and
liabilities between two different points of time. Again, while balance sheet is the end
result of all accounting operations for a period of time? The funds flow statement
provides additional information as regard changes in working capital derived from
financial statements at two points of time. It is a tool of management for financial
analysis and helps in making decisions.
1. It helps in the Analysis of Financial operations:
The financial statements reveal the net effect of various transactions on the
operational and financial position of the concern. The balance sheet gives a static view
of the resource of a business and these have been put at a certain point of time. But it

does not disclose the causes for changes in the assets and liabilities between two
different points of time. The funds flow statements explains cause for such changes and
also effect these changes on the liability position of the company. Some times concern
may operate profitability and yet its cash position may become more and worse. The
funds flow statement gives a clear answer to such a situation explaining what happened
to the profits firm.
2. It throws light on May perplex Questions of general interest:
Why were the net current assets lesser in spite of higher profits and
vise versa?
Why more dividends could not be declared in spite of available
profits?
How was it possible to distribute more dividends than the present
earnings?
What happened to the profit and where it has gone?
What happened to the proceeds of sales of fixed assets, issue of
shares, debentures, etc?
3. It helps in the Formation of Business of Realistic Dividend Policy:
Sometimes a firm has sufficient profits available for distributing as dividend but
yet may not be available to distribute for cash resources. In such cases a funds flow
statement helps in the information of a realistic dividend policy.

4. It helps in the proper Allocation of Resources:
The resources of a concern are always limited and it wants to make the best use
of these resources. A project funds flow statement constructed for the future helps in
making managerial decisions. The firm can plan the development of its resources and
allocate them many various applications.
5. It Acts as a Future Guide:
A projected funds flow statement also acts as a guide for future to the
management. The management can come to know the various problems it ids going to
face in near future for want of funds. The firms future needs of funds can arrange to
finance these needs more effectively and avoid future problems.
6. It helps in appraising the use of Working Capital:
A funds flow statement helps in explaining the management has its working
capital and also suggest way the management has used its working capital position of
the firm.
7. It helps knowing the Overall credit Worthiness of a firm:
The financial institution and banks such as state financial institutions, industrial
development corporation of India, Industrial Development Bank of India etc., all ask for
funds flow statement constructed for a number of years before granting loans to know
the credit worthiness and paying capacity of firm. Hence a firm is seeking assistance
from these institutions has to know alternate but to prepare functional statement.
LIMITATIONS OF FUNDS FLOW STATEMENT
The Funds Flow Statement has a number of uses: however, it has certain
limitations also, which are listed below.

It should remember that a Funds Flow Statement is not a substitute of
an income statement or a balance sheet. It provides only some
additional information as regards chances in working capital.
It cannot reveal continuous changes.
It is not an original statement but simply is arrangement of date given
in the financial statements.
It is essentially historic in nature and project funds flow statement
cannot be prepared with much accuracy.
Changes in cash are more important and relevant for financial
management than the working capital.
Business transactions and flow of funds:
It may be noted at this stage of analysis that for the purpose of funds flow
statement, the items of balance sheet are classified into two broad categories viz.,Items
of current accounts and Items of non-current accounts.

Current account Items
Current assets Current liabilities
Cash in hand Bills payable
Cash at bank (including fixed deposits) Trade or sundry creditors
Bills receivable Outstanding expences
Trade or sundry debtors Cash credit/bank overdraft
Inventory-Raw-materials, work in- Short-term loans
progress, Finished Goods, Stores,etc
Prepaid expenses Income received in advance
Outstanding incomes Long-term loans (or part) which fall due
for repayment within a year
Short-term loans and advances Provision for doubtful debts and
Temporary investments, etc discount on debtors

Non-current Account Items
Non-current assets Non-current liabilities

Land and Buildings Equity share capital
Plant and Machinery and vehicles Preference share capital
Furniture and fittings Debentures
Goodwill Reserves and surplus
Patents, trade marks, copy rights, Long term loans
preliminary expenses and profit and loss
account(deficiency),etc
The word fund is to denote working capital. Funds flow there fore refers to the
changes in the fund (i.e., working capital) by the transactions operational, financial
and investment, though the effect of all the transactions on the funds are considered, it
should be remembered here that not all the transactions cause the flow of funds .
Transactions Affecting Flow of Funds:
Increase in current assets but not any increase in current liabilities.
Decrease in current assets but not any decrease in current liabilities.
Increase in current liabilities but not any increase in current assets.
Decrease in current liabilities but not any decrease in current assets.
Transactions not Affecting Flow of Funds:
(CHANGE IN WORKING CAPITAL)

Transactions which make conversions of one current into another
current assets.
Transactions which make conversions of one current liability into
another current liability.
Transactions which bring increase or decrease in current assets
causing a corresponding increase or decrease in current liabilities by
the same amount.
Funds Flow Statement:
The Funds Flow Statement is also known as FUNDS FLOW ANALYSIS.
There are several names for this statement; some are
Statement of sources and applications of funds.
Statement of inflow and outflow of funds.
Statement of Fund Supplied and Applied.
Statement of Resources provided and Applied.
Where got and where gone Statement.
Funds Flow Statement:

The Funds Flow Statement is also known as FUNDS FLOW ANALYSIS.
There are several names for this statement; some are
Statement of sources and applications of funds.
Statement of inflow and outflow of funds.
Statement of Fund Supplied and Applied.
Statement of Resources provided and Applied.
Where got and where gone Statement.
various factors for inflow and outflow of working capital area shown in a statement,
particularly prepared for this purpose, which is known a Funds Flow Statement.
This statement reveals the manner in which the financial resources have been generated
and deployed during the accounting period. This statement is also considered as an
important one as the two traditional financial statements as it supplies important
information for the users. In brief it may be said that fund statement focuses on the flow
of funds between the various assets and equity items during the accounting period and
on analysis basis this statement is generally called as Funds Flow Analysis.
IMPORTANCE OF FUNDS FLOW STATEMENT:

The balance sheet and profit and loss account failed to provide the
information which is provided by Funds Flow statement i.e., changes in
financial position of an enterprise. This statement indicates the changes
in financial position of an enterprise.
This statement indicates the changes which have taken place between
the two accounting dates.
Gives details of sources and uses of funds during given period is of
great help to the users of financial information.
It is also a very useful tool in the hands of management judging the
financial and operating performance of the company.
It also indicates the working capital position which helps the
management in taking policy decisions regarding dividend etc.,
Funds Flow statement helps in answering questions like where the
profits have gone? Why there is imbalance existing between liquidity
position and profitability position of the enterprise? Why is the concern
financially solid in spite of losses?
It helps management to take policy decisions to decide about the
financing policies and capital expenditure programmed for future.

DIFFERENCE BETWEEN
FUNDS FLOW STATEMENT AND BALANCESHEET
FUNDS FLOW STATEMENT BALANCE SHEET
1. It is a statement of changes in 1. It is a statement of financial
Financial position and hence is position on a particular date
Dynamic in nature and hence static in nature.
2. It shows the sources and 2. It depicts the assets and
Applications of funds in a funds liabilities at a
Particular period of time. Particular point of time.
3. It is a tool of management for 3. It is not of much help to
Financial analysis and helps in management in making
Making decisions. Decisions.
4. Usually, schedule of changes in 4. No such schedule of
Working capital has to be prepared changes in working
Before preparing funds flow capital is required rather
Statement. Profit & loss account is
Prepared.

DIFFERENCE BETWEEN
FUNDS FLOW & CAH FLOW STATEMENT
FUNDS FLOW STATEMENT CASH FLOW STATEMENT
1. It is based on a wider concept 1. It is based on a narrower
of Funds, i.e., working capital. concept of funds i.e., Cash.
2. It is based on accrual basis of 2. It is based on cash basis of
Accounting. Accounting.
3. Schedule of changes in 3. Schedule of changes in
working capital is required working capital is not
to be prepared. required to be prepared.
4. Funds Flow Analysis reveals 4. It is prepared by taking the
the sources and applications opening balance of cash,
of funds the net difference adding to this all the inflows
between sources and application of cash and deducting the
of funds represents net increase outflows of cash from the
or decrease in working capital. total, difference represents
Closing balance of cash.
5. It is useful for long term planning. 5. It is more useful for short
term analysis and cash
Planning.

PROCEDURE FOR PREPARING A FUNDS FLOW STATEMENT
Funds Flow statement is a method by which we study changes in the financial
position of a business enterprise between beginning and ending financial statements
dates. Hence, the funds flow statement is prepared by comparing two balance sheets
and worth the help of such other information derived form the accounts as may be
needed.
Broadly speaking, the preparation of funds flow statement consists of two parts:
Statement of Schedule of Changes in Working Capital
Statement of sources and Application of Funds
1. Statement of Changes in Working Capital:
Working Capital means the excess of current assets over current liabilities.
Statement of Changes in Working Capital Is prepared to show the changes in the
working capital between the two balance sheet dates. This statement is prepared with
the help of Current Assets and Liabilities derived with the help of Current Assets and
Current Liabilities derived from the two balance sheets as:
Working Capital = Current Assets Current Liabilities.
An increase in Current Assets increase Working Capital
A decrease in Current Assets decrease Working Capital
An increase in Current Liabilities decrease Working Capital
A decrease in current Liabilities increase Working Capital
The changes in all current assets and liabilities are merged into one figure only
either an increase or decrease in working capital over the period for which funds

statements has been prepared. If the working capital at the end of the period is more
than the working capital at the beginning thereof, the difference is expressed as
Increase in working capital. On the other hand, if the working capital at the end of the
period is less than that at the commencement, the difference is called Decrease in
Working Capital
2. Funds Flow Statement:
Funds flow statement is a final statement. It shows the amount used in a
particular period of time i.e., Application of Funds and the how much amount comes
into the organization in a particular period. Finally those application and sources are
balanced.

1) Schedule of changes in Working capital:

PARTICULARS PREVIOUS CURRENT EFFECT ON WORKING
YEAR YEAR CAPITAL
INCREASE DECREASE
CURRENT ASSETS
Inventories *** *** ** -
*** *** ** -
Sundry Debtors
Cash &Bank
*** *** - **
Loans& Advances *** *** - **
**** ****
Total Current Assets(a)
CURRENT LIABILITIES
-
Current Liabilities *** *** **
Provisions *** ***

- **
**** ****
Total current liabilities(b)
Working Capital (a-b) *** ***
Net increase or decrease in

working capital *** *** **
**
**** **** *** ***

2) Statement of sources and uses of funds:

Sources Amount Applications Amount
Rs Rs
Funds from operations *** Redemption of preference ***
Issue of shares and *** shares and debentures ***
Debentures *** Repayment of loan ***
Long-term Loans Purchase of Investment,
*** ***
Sale of investment, Fixed Fixed assets, etc
***
assets, etc Non-Trading Expenses ***
Non-trading Income *** Increase in working capital ***
Decrease in working capital ***
Note:* Any one of these will find the place in the statement
+ Any one of these will find the place in the statement
Funds means working capital this working capital represents the difference
between current assets, current liabilities. All flows of funds pass through working
capital. This means that every transaction has an effect on the firms working capital
position.
1. An example illustrates this as follows:-

2. An increase in profits increases the cash balance and hence working
capital,
3. An increase in long term liability or any decrease in fixed assets increase
the cash balance and hence working capital.

Therefore the Funds Flow Statement shows the movement of funds into or out of the
current asset account of the firm.
The movement of funds has two aspects:-
Sources of funds.
Uses of funds
The former supply funds to the working capital and enhances its position. On
the other hand, the latter consume funds and erode the working capital position.
SOURCES OF FUND:
Issue of new shares
Issue of debentures
Creation of long term liability
Profit from operation
Issue of new shares:
On comparing the balance sheet of two dates there is an increase in share
capital. It would affect working capital to the extent of current assets. If it does not have
any impact upon fund, it would not be a source of fund. For example, shares issued and
cash/stock/furniture received. Merely only cash and stock will affect the fund as these
are the companies of working capital.
Issue of Debentures:
That amount of issued debentures would be a source of fund which affects
working capital.
Creation of Long term Liabilities:

If loan and mortgaged loan has been taken its increase between two balances
sheet dates would be a source of fund.
Sale of Fixed Assets:
Any decrease in fixed assets due to sale of fixed assets is shown in the sources
of fund as it involves cash or other current assets which are the elements of working
capital.
Profit from Operations:
It is a source of fund, to be shown on the sources side.
Applications of Funds:
The fund acquired in the business may be used in the following items:
LOSS FROM OPERATION
DISCHARGE OF LIABILITY
REDEMPTION OF DEBENTURES
REDEMPTION OF PREFERENCE SHARES
ADDITION IN ASSETS
Loss from Operations:
Just like profit from operations is a source. Similarly loss from operations is
treated as uses of fund. In fact, incurring of loss means out flow of funds. It may be due
to increase in liabilities or decrease in assets or both.
Discharge of Liability:

Any decrease in long term liability would be the indicator that fund ha gone
from the business liability which may be decreased due to decrease in assets ( payment
of creditors by giving cash of fixed assets to them ) or increase in liability. For example,
a liability is converted into another.
Redemption of Debentures:
If the redemption is made through conversion into shares or new debentures, it
does not affect funds. If they are rendered in cash, it would affect fund.
Redemption of Preference Shares:
If these preference shares are rendered by issue of new preference shares or
equity shares or debentures such decrease in preference shares will not be treated as use
of fund, as the flow of fund does not take place in this transaction.
Addition in Assets:
If these assets whether current or fixed are increased, it will be shown in the
users of fund because such increase entails outflow of fund. If there is increase in fixed
assets accompanied either by increase in long term liabilities or increase in share
capital, there will not be outflow of fund. On the other hand, if these fixed asset are
accompanied by decrease in current assets or increase in current liability, there would
certainly be out flow of fund.

INDUSTRY PROFILE
The textile industry occupies a unique place in our Country .One of the earliest

to come into existence in India, it accounts or 14% of the total Industrial production,
contributes to nearly 30% of the total exports and is the second largest employment
generator after agriculture.
India contributes to about 25% share in the world trade of cotton yarn. India, the
worlds third-largest producer of cotton and the second- Largest producer of cotton
yarns and textiles, is poised to play an increasingly important role in global cotton and
textile markets as a result of domestic and multilateral policy reform.
Indian textile industry contributes about 22 % to the world spindle age and
about 6% to the world rotor capacity installed .India has second highest spindle age in
the world after China with an installed capacity of 38.60 million spindles. Indian textile
industry has the highest loom age (including handlooms) in the world and contributes
about 61% of the world loom age. It contributes about 12% to the world production of
textile fibers and yarns. India is one of the largest consumers of cotton in the world,
ranking second next to China in production of cotton yarn and fabrics and first in
installed spinning and weaving capacity.
Textile industry is providing one of the most basic needs of people and the holds
importance; maintaining sustained growth for improving quality of life. It has a unique
position as a self-reliant industry, from the production of raw materials to the delivery
of finished products, with substantial value-addition at each stage of processing; it is a
major Contribution to the country's economy.
Its vast potential for creation of employment opportunities in the agricultural,
industrial, organized and decentralized sectors & rural and urban areas, particularly for
women and the disadvantaged is Noteworthy.
Although the development of textile sector was earlier taking place in terms of
general policies, in recognition of the importance of this sector, for the first time a
separate Policy Statement was made in 1985 in regard to development of textile sector.
The textile policy of 2000 aims at achieving the target of textile and apparel exports of
US $ 50 billion by 2010 of which the share of garments will be US $ 25 billion. The
main markets for Indian textiles and apparels are USA, UAE, UK, Germany, , Italy,
Russia, Canada, Bangladesh, and Japan.
The main objective of the textile policy 2000 is to provide cloth of acceptable
quality at reasonable prices for the vast Majority of the Population of the country, to

increasingly contribute to the provision of sustainable employment and the economic

growth of the nation; and to compete with confidence for an increasing share of the
global market vast pool of skilled manpower; entrepreneurship; flexibility in production
process; and long experience with US/EU (European Union).
At the same time, there are constraints relating to fragmented industry,
constraints of processing, quality of cotton, concerns over power cost, labour reforms
and other infrastructural constraints and bottlenecks. E.g., cost of power was Rs.8 per
garment in India whereas in China it was only Rs.2 per garment.
Further, for the benefit of exporters, there should be a state-owned cargo
shipping mechanism. Several initiatives have already been taken by the government to
overcome some of these concerns including rationalization of fiscal duties; technology
up gradation through the Technology Up gradation Fund Scheme (TUFS); setting up of
Apparel Parks; and liberalization of restrictive regulatory practices.
Current scenario:
Developing countries with both textile and clothing capacity may be able to
prosper in the new competitive environment after the textile quota regime of
quantitative import restrictions under the multi-fiber arrangement (MFA) came to an
end on 1st January, 2005 under the World Trade Organization (WTO) Agreement on
Textiles and Clothing.
The mood in the Indian textile industry given the phase-out of the quota regime
of the multi-fiber arrangement (MFA) is upbeat with new statement lowing in and
increased orders for the industry as a result of which capacities are fully booked up to
April 2005. As a result of various initiatives taken by the government, there has been
new investment of Rs.50, 000 crore in the textile industry in the last five years.
Nine textile majors invested Rs.2, 600 crore and plan to invest another Rs.6, 400
crore. Further, India's cotton production increased by 57% over the last five years; and 3
million additional spindles and 30,000 shuttles-less looms were installed.
The industry expects investment of Rs.1, 40,000 crore in this sector in the post-
MFA phase. A Vision 2010 for textiles formulated by the government after intensive
interaction with the industry and Export Promotion Councils to capitalize on the upbeat
mood aims to increase India's share in world's textile trade from the current 4% to 8%
by 2010 and to achieve export value of US $ 50 billion by 2010 Vision 2010 for
textiles envisages growth in Indian textile economy from the current US $ 37 billion to
$ 85 billion by 2010; reaction of 12 million new jobs in the textile sector; and

modernization and consolidation for creating a globally competitive textile industry.

There will be opportunities as well as challenges for the Indian textile industry
in the post-MFA era. But India has natural advantages which can be capitalized on
strong raw material base - cotton, man-made fibers, jute, silk; large production
capacity (spinning - 21% of world capacity and weaving - 33% of world capacity but
of low technology);
Investment in Indian Textile Industry:
The scenario of investment in the Indian textile industry started to change after
the inception of the special Textile Package during the 2003-2004 budgets. The
recommendations made in the budget included the reforms that are required to be made
in the fiscal policy of the Indian textile Industry for attracting investment in this
industry.
The policy matters associated with restructuring of debt for financial viability of
this industrial sector are also being addressed in this budget. A fund was set up in
accordance with the recommendations of the aforesaid budget with an initial principal
amount of Rs.3000 crores. This fund was meant for restructuring of the textile sector.
Factors responsible for wooing the investors in Indian textile industry:

The size of the textile along with apparel market in India is quite big.
Performance of this industry has been consistent right from the start of the new
millennium.
Availability of the skilled labor in India is comparatively cheap in relation to the
same in other parts of the world.
The policies related to the Foreign Direct Investment in India are comparatively
lenient and are transparent in nature among all the developing countries.
There is no limit on foreign direct investment in the textile industry and
hence 100% direct investment can be done by the foreign capitalists in the
Indian textile industry
Foreign Investments done in the Indian Textile Industry through the automatic
route offers a hassle-free way of investing. These investments are not required
to be approved by the government or the apex bank of India, RBI. The foreign
investors are only required to make a notification to the regional office of the
apex bank only after receiving the receipt of the remittance. This notification is

required to be done within thirty days from the date of receiving the remittance.
The ministry concerned with the development of Textile Industry in India has
formed a special cell for attracting FDI in this sector.
Objectives of this special cell for wooing FDI are:

This cell helps the willing foreign companies to find out viable partners meant
for floating a joint venture company in order to produce textile products.
FDI special cell acts as the mediator between the foreign investor and the
different organizations for setting up the textile industry. The specialized helps
that are given by this cell involve advisory support along with assistance.
At the time of operation of the textile industry set by the foreign investor certain
problems may crop up. These problems are sorted out by the FDI cell.
FDI cell monitors as well as maintains the data related with the total
production of the textile sector. They also collect the stratified data of
production by both domestic industry as well as the industry set up by the
foreign investor. It has been found out that the percentage share of the textile
industry in the total foreign investment done was 1.02%.
A major development has occurred in the textile industry when Blackstone, an
investment management company of USA has bought 50.1% stake of the domestic
apparel manufacturing company called Gokaldas Exports. The deal was sealed at the
price of Rs 275 per share. After the completion of the stake transfer the promoters of the
Gokaldas Exports, the Hindujas, were left with a share amounting to 20%.
As a part of domestic textile sector expansion, the companies of Indian origin
are also not far behind in making investments. Arvind Mills Limited is expanding its
production as well as capacity base through the construction of two new industrial set
ups in Bangalore and Ahmadabad.
Another textile company of India named Super Spinning Mills is also acquiring
two sick units of Madurai for enhancing their production capacity for meeting the needs
generated by the USA market World largest terry towel producing company called Wels
pun India Ltd. is setting up a textile plant in the state of Gujarat at the initial capital of
US$ 220 million.

Growth of Indian Textile Industry:

Growth along with the investment of an industry depends heavily on the
economic health of the country. Indian economy grew rapidly during the fiscal year
2007-2008 posting a growth rate of 9.4% p.a. Not only this, India has been performing
significantly in the last three years where its average yearly rate of growth has been
estimated to be 8%.
The fruits of economic growth have trickled down to people of the state which
can be evidenced from the rising per capital income of India. Statistics reveal that
during 2002-2008 (up to March 2008) the per capital income of India has increased by
sixty two percent and has reached the level of Rs 25,778 or US$ 581.37 per annum.
One of the most beneficial classes of this economic growth saga has been the
middle income section of the society. The total strength of this class in absolute terms
has been found out to be 216 million which is expected to rise to 351 million by 2010.
The major demand that is being generated is by a new class of people from the booming
IT-BPO sector who are still at their prime age and are outwardly fashion savvy. This has
generated huge demand for fashionable dresses which has consequently led to the
emergence of some world class Indian designers with their latest fashion apparels.
Propensity of consumption (after excluding all spending on essential items like
housing, health, education, etc.) by the average Indian people has increased at the rate
of 5% to a total amount of US$ 219 billion in the year 2005. At this time, the organized
retail sector has been able to tap a market of around US$ 8.2 billion which is projected
to increase to US$ 25 billion by 2010.
Textile industry is one of the major contributors to the total output of the act
growing Indian industrial sector which is at present revolving around 4%. Textile
sector's contribution to GDP of India is also significant which currently amounts to 4%.
It has been found out that Indian textile industry s one of the major sources of foreign
exchange earnings for India and contributes around 16-17%.
From the above discussion it is quite clear to us that the market size of India is
growing at a very high pace. That is why the foreign investors are flocking to India for
investment purposes in order to get hold of a chunk of this expanding pie. With
increasing demand for the products of Indian Textile Industry, new players are jumping
in the league to get a slice of the profitable pie and the already existing textile mills are
raising their capacity for increasing their supply.

Thus, it can be said that the whole Indian economy is on a growing trend
which has its obvious impact on every possible sector including the Indian
Industry. Indian Textile Industry is going through a major change in its outlook
after the expiry of Multi-Fiber Agreement.
Multi Fiber Agreement was introduced in the year 1974 as a short term measure
directed towards providing a limited time period to the developed countries for
adjusting their textile industries in accordance with that of the developing countries.
The textile industries are characterized by their labor intensive nature of commodity
production. Availability of surplus labor is abundant in the developing countries. These
countries have comparative advantage in the production of textile related products and
hence are able to supply goods at a very low price. The basic idea behind this policy
was to eradicate all sorts of quota system from the apparel and textile industry all over
the world so that a level playing field could be established.
Now, this era after MFA is being looked upon by the experts as a means through
which the Indian textile and apparel industry is going to grow a much faster pace and
would consequently be able to leave a mark on the whole world. Integration of this
Indian industry with that of the whole world started from the last period of 1980s. It
came up to the top ten league of countries involved in export of textile as well as
apparel products after 1998. According to the statistics of United Nations Statistical
Division, 2005 it was clear that during the entire 1990s, the average compounded
growth rate of clothing item export was more or less.
Now, let us see some of the figures in order to understand the absolute as well as
relative change in the textile industry in terms of projections from the financial year
2005-2006 up to 2010-2011 where the final financial year represents the projected
figure.
The figure above shows total produce of Indian Textile Industry in fabric sector
along with the produce in all the sub sectors under it. This highlights the fact that the
total production of fabricated products by the Indian Textile Industry between the
period 2002-2003 and 2004-2005 increased at a moderate rate from 41973 million
square meters to 45378 million square meters. But after the MFA period (i.e. after
01.01.2005), the same has increased from 45378 million sq. mts to 54260 million sq.
mts between the period 2004-2005 and 2006-2007. Hence it is evident that the
percentage increase in the fabric textile product during the period 2004-2005 and 2006-

2007 has seen a rise of around 16.37% whereas it was only 7.5% during 2002-2003 and
2004-2005.
National Textile Policy:
The National Textile Policy was formulated keeping in mind the following objectives:
Development of the textile sector in India in order to nurture and maintain its
position in the global arena as the leading and exporter of clothing.
Maintenance of a leading position in the domestic market by doing away with
import penetration.
Injecting competitive spirit by the liberalization of stringent controls.
Encouraging Foreign Direct Investment as well as research and development in
this sector.
Stressing on the diversification of production and its up gradation taking into
consideration the environmental concerns.
Development of a firm multi-fiber base along with the skill of the weavers and
the craftsmen.
Such goals are set to meet the following targets:
The size of textile and apparel exports must reach a level of US 50 billion by the
year 2010.
The Technology up gradation Fund Scheme should be implemented in a strict
manner.
The garments industry should be removed from the list of the small scale
industry sector.
The handloom industry should be boosted and encouraged to enter into foreign
ventures so as to compete globally. The National Textile Policy has also
formulated rules pertaining to certain specific sectors. Some of the most
important items in the agenda happen to be the availability and productivity
along with the quality of the raw materials. Special care is also taken to curb the
fluctuating price of raw materials. Steps have also been taken to raise silk to the
international standard preamble.
To comprehend the purpose of textile industry that is to provide one the most
basic needs of the people and promote its sustained growth to improve the
quality of life. .

To understand its immense potentiality for creating employment opportunities in

significant sectors like agriculture, industry, organized sector, decentralized
sector, urban areas and rural areas, specifically for women and deprived.
Recognize the Textile Policy of 1985, which boosted the annual growth rate of
cloth production by 7.13%, export of textile by 13.32% and per capita
availability of fabrics by 3.6%.
To acknowledge textile industry as a self-reliant industry, from producing raw
materials to delivery of finished products; and its major contribution to the
economy of the country
To analyze the issues and problems of textile industry and the guidelines
provided by the expert committee set up for this specific purpose.
To give a different specification to the objectives and thrust areas of textile
industry.
To produce good quality cloth for fulfilling the demands of the people with
reasonable prices.
To maintain a competitive global market.
Thrust areas:
Government of India is trying to promote textile industry by giving emphasis on
several areas of textile, which are as below:
Innovative marketing strategies
Diversification of product
Enhancement of textile oriented technology
Quality awareness
Intensifying raw materials
Growth of productivity
Increase in exports
Financing arrangements
Creating employment opportunities
Human Resource Development
Government of India has set some targets to intensify and promote textile industry. To
materialize these targets, efforts are being made, which are as follows:

Textile and apparel exports will reach the US $ 50 billion mark by 2010
All manufacturing segments of textile industry will come under TUFS
(Technology Up gradation Fund Scheme)
Increase the quality and productivity of cotton. The target is to increase 50%
productivity and maintain the quality to international standards.
Establish the Technology Mission on jute with an objective to increase cotton
productivity of the country
Encourage private organization to provide financial support for the textile
industry
Promote private sectors for establishing a world class textile industry
Encourage handloom industry for producing value added items
Encourage private sectors to set up a world class textile industry comprising
various textile processing units in different parts of India
Regenerate functions of the TRA (Textile Research Associations) to stress on
research works government policy on cotton and man made fiber.
Other thrust areas:

1. Information technology:
Plays a significant role behind the development of textile industry in India. IT
(Information Technology) can promote to establish a sound commercial network for the
textile industry to prosper.
2. Human Resource Development:
Effective utilization of human resource can strengthen this textile industry to a large
extent. Government of India has adopted some effective policies to properly utilize the
manpower of the country in favor of the textile industry.
3. Financing arrangement:
Government of India is also trying to encourage talented Indian designers and
technologists to work for Indian textile industry and accordingly government is setting
up venture capital fund in collaboration with financial establishments.
4. Acts:
Some of the major acts relating to textile industry include
a Central Silk Board Act, 1948
b The Textiles Committee Act, 1963

c The Handlooms Act, 1985

d Cotton Control Order, 1986


COMPANY PROFILE
SRI SESHA SAI SPINNING MILLS PVT. LTD
Sri Sesha Sai Spinning mill is an ISO certified company engaged in manufacture
of cotton yarn. Almost 80% of produce is being exported at present. The state of the art
mill is located at Chebrolu near Guntur, 250 kms away from Hyderabad. It has a
capacity of 28700 spindles to produce electronically cleared, auto coned spliced high
quality yarn uster controlled at all stages of production.
The current product range covers 100% cotton yarns in count range Ne 30 - Ne 80 for
hosiery (knitting) & warp (weaving), both as single ply in combed and carded versions.
Production is carried out under stringent quality controls and tight quality monitoring to
ensure a consistent quality of yarn conforming to International standards.
THE MAJOR EQUIPMENT INSTALLED IN THE MILLS:
Blow Room- Lakshmi Rieter MBO, monocylinder, unimix,ERM, hopper feeder
and scutcher.
Cards- Textool TC-360 Cards & Truzschler DK 740 cards with autolevellers.
Combers - Lakshmi Rieter E 7/4 combers & Rieter E60H comber.
Draw Frames - Rieter RSB1 & RSB 951 draw frames with autolevellers.
Speed Frames LF 1400A speed frames with 3/3 & 4/4 drafting system,
equipped with positive top & bottom clearers.
Ring Frames - Textool DJ-50 and Lakshmi Rieter G5/1 ring frames with
overhead cleaners.
Winding - Schlafhorst autoconer 238 with loepfe electronic yarn clearers and
muratec 7-7 autoconers with uster yarn cleaners. siro- clearer is also installed for
contamination free yarn.
T.F.O.- NIL
Yarn Conditioning - 'SIEGER' make, most modern yarn conditioning plant.

Ultra Violet Inspection - 100% production (cones) are inspected under ultra
violet (u.v.) light
Quality Control- uster HVI 900 for cotton testing - each and every bale is tested
to ensure consistent mixing lay down for a consistent yarn. uster evenness Tester
UT-3 with hairiness module, cascade & uster classimat CMT-3 for yarn testing.
PREPARATORY
Sophisticated Cotton Cleaning/Blending Installation with Automatic Waste Evacuation
System and Rotary Air Filters for Processing World Class Yarn
Delignetly Planned plant Positioning
Uncompromising perfect production priming.
Adoption of innovative technological application.
Elaborate conditioning equipment installation.
Modern Card of Trutzschler DK 740 with Automatic Waste Collecting System
Automated sequency
Invoking competence!
High Efficiency Automatic Lap Preparation to Feed Modern Combing Machines
Instilling confidence
Achieving Excellence,
Latest Model Combers of Rieter's E60H & Lakshmi Rieter's E7/4 for Optimum Raw
Material Utilization for Outstanding Yarn Quality Rieter's High Performance Auto
Leveller Draw Frame RSB 951 to Ensure Better Count CV% of Yarns of Highest
Quality Standards
SPINNING

Constant commitment to high quality standards and innovation has been the
secret of success ever since the company was founded. Superior Spinning units ensure
the supply of consistent quality yarn to manufacture the garments. Our Spinning Units
leads the quality of yarn in the market. Ultimately, the crunch lies in the infusion of hi-
tech, state-of-the-art machinery that aids in the production of high quality 100%
combed yarn, in counts that range from NE 30s to 80s in single and doubles. The
testimony to modernisation and up gradation lies in the fact that the oldest machine in
the plant is less than 10 years Coupled with global standards of process manufacturing
that turn out year of superior quality in durability as well as finish. To produce superior
quality garments, we ensure that every kilogram of yarn supplied from our Spinning
unit conforms to International standard and with zero complaint.
Production Capacity - 5500 kgs per day
Roving Frames with Overhead Traveling Cleaners for Production of Qualitatively High-
Grade Yarn.
High Precision Ring Spinning Machines with Ring Data-Monitoring System
POST SPINNING
A quality yarn package is vital for high productivity in the Doubling, Warping, Weaving
or Knitting plant.
The systems offer the best product that could decisively contribute to the users'
production costs. Each package is exactly as it should be -- confirming to the customer's
specifications.
These Yarns offer the consumers many advantages:
Reduced frequency of yarn breaks
Increased Efficiency
Lower Production Costs
Significant Saving in Burling and Mending Costs

Low-cost of Claims & Seconds and Consummately Better Quality of the Finished
Product.
QUALITY ASSURANCE :Quality Assurance Lab. Equipped with Computer aided

testing facilities procured from world's No.1 manufacturer, M/s Zellweger Uster,
Switzerland, analyses and determines Fibre mass/ Yarn count variations &
imperfections, enabling to achieve an effective quality control and improved
supervision of the functioning of the individual processing stages. Each customer's
specific requirement is taken care of to deli gently build bridge of confidence
USTER TESTER - 3 The Key Sliver & Yarn testing instrument to verify the quality
goals set. Quality-conscious Customers are assured of comprehensive analysis print-out
for the yarns delivered to them.
Computerized Strength Management
USTER SPIN LAB HVI 900-10-20 for Fiber testing to determine bundle Fiber Quality
Parameters
USTER CLASSIMATE -3 for Optimum Quality Management
PACKING
YARN CONDITIONING PLANT
Treatment improves physical yarn properties by stabilizing uniform moisture content at

tempera- tures compatible to each individual type of yarn, yielding advantages for down
stream yarn processing stages, even distribution of moisture by unique yarn
conditioning process. Even friction values through the cone.
Increased yarn Tenacity (cotton) and elongation implies very efficient weaving and
knitting Perfect thermal stress relaxing of fibers eliminates snarling of yarn
computerized process with precision sensors.
Perfect batch to batch reproduction.Perfect Packages Prepared for Export

QUALITY:In modern fashion technology, the demand for perfection begins right at the
birth of the raw material, permeates through every single process, till the highly
discerning customer dons the finished garment. It is this demand for perfection that
has spurred the growth of an organization and its corporate philosophy.
Those who can furnish clients with the best quality, competitive price, excellent
customer services and prompt delivery can only survive in the market. SVSP takes
immense pride in perceiving its role as the comprehensive architect of every single yarn
and garment that its produces a multi-unit, multi-interest business group with a wide
range of industrial activity, an organization that has founded its evolution on value-
based commercial practice.
SVSP Pvt. Ltd was established in 2004-05 with an initial capacity of 12600 spindles
Over its four years of growth it has expanded to 32000 spindles spread over 3
operational units.
EXPORTS
Because of growing customer interest in products from around the world, SVSP has
explored international markets and exports products to many countries to meet those
demands.
KEY FIGURES AT GLANCE EXPORT SALES FOR A PERIOD OF SIX

YEARS:
YEARS IN RUPESS IN USD
2004-05 25 lakhs -
2005-06 682 lakhs -
2006-07 1427 lakhs -
2007-08 1635 lakhs -

2008-09 1700 lakhs -
2009-10 1702 lakhs -
GARMENTS:After its success with backward integration, it was but a natural

corollary that the company should go in for forward integration into garment
manufacture as well. And thus came into being a massive styling unit situated at
Coimbatore.
The unit specialized in manufacturing single and double mercerised 100% cotton -
knitted polo T-shirts with collars and cuffs. These are either in solid shades or in
yarn-dyed fabric or both which in turn are mercerised and silicon softened in tubular
knit form. Also in the range are regular T-shirts in the non-mercerised range.
Garment Range
Manufacturing of cotton / synthetic knitted garments
Mens / Womens T-shirts and Polo shirts specialized in Gassed Single / Double
Mercerized Polo Shirts Cut & Sewn Garments, Collar Shirts, Basic Round-neck shirts
etc.
PRODUCTIONN CAPACITY: Garments from Super Spinning Mills make

consumers feel comfortable, pampered and contemporary in clothing. We use the yarns
manufactured in-house to give life to innovative textile creations through knitting. Our
professional know-how in this area ensures that our garments reach the highest quality
standards and acquire the desired feel and optimum good looks. Processing is done on
the avant-garde machines and finishing lines.
Testing, for its part, is done at a well-equipped lab, matching global standards.
CUSTOMERS OF THE COMPANY
We are supplying yarn to the following Parties under Merchant Export.

Party Name From Date To date Supplying Counts

GTN Textiles Cochin Jan,05 Till Date 61/1s CW Yarn
GTN Industries Hyd., Jano5 Till Date 60/1s CW Yarn
Prime Textile Ltd., - Tirupur Jan'05 Till Date 50/1CW,60/1CW&60s CH
RM Mothite Textiles Limited OCT'05 Till Date 60/1s CW
Prathibha Syntex Ltd Nov'05 Till Date 60/1s CW
Lahoti Overseas Ltd. Nov'05 Till Date 40/1s CH & 60/1s CW
Kikani Exports Pvt. Ltd Sep '06 Till Date 60/1s CW,50/1& 40/1 CH
Sharda Spuntex Pvt.Ltd., Oct '06 Till Date 50/1 & 60/1 CW
Sholingur Textiles Ltd., Oct '06 Till Date 60/1s CW Yarn
TT LIMITED NEW
Nov07 Till Date 60/1s CW Yarn
DELHI
Himatsingka Linens Apr08 Till Date 40/1s CW Yarn
Manufacturing process in Sri Sesha Sai Spinnig mill, ltd.
MIXING
BLOWROOM
CARDING
DRAWING
SIMPLEX
SPINNING
CONEWINDING

DESCRIPTION
Mixing:
Cotton is the main raw material used in the manufacture of the cotton yarn.
Different varieties of cotton are mixed together for each mixing count to take advantage
if the desirable characteristics of each quality of cotton and to obtain desired quality of
yarn at minimum cost.
Blow room:
In this process cotton is opened into small lints removed impunities like trash, sand and
seeds, and cleaned cotton is collected in the form of a sheet tangled fiber rolled into
laps. The laps are produced have to meet predetermined weight per unit length.
Carding:
In carding the fibers, which are in the lap form, are brought into alignment and arranged
in a silver form. In this process some impurities still lying in the laps and certain
amount of short fiber are removed. The finished product of this process is delivered in
the form of silver, which is collected in cans.
Drawing:
Several silvers are fed together and drawn at higher speed to get silver of the same
thickness. This process brings about more uniformity by law of average combining
thick and thin places in the silvers.
Simplex:
This is also called inter process. The purpose of this process is to attenuate the silver
into thinner and thinner stands to achieve the desired ultimate yarn count. It is thus
made suitable for spinning into yarn.
Spinning:
Simplex material is fed to ring frames and the material is further drawn thinner, so as to
get the final count required.
Cone winding:
In this process the right bobbin yarn is would on to cones. Every cone winding machine
is having 120 drums with 3 diameter, 6 traverse. Machine can be capable to work
with 660 YPM (yards per minute). We have more than enough capacity of drums.
Cone packing:
The cones are packed into bags of 50 Kgs each the packed bags are ready for dispatch.


STATEMENT OF CHANGES IN WORKING CAPITAL

2010-2011
Table-1
Particulars 2010 2011 Changes in WC
Rs. Rs. Rs.
Increase Decrease
Current Assets:
Inventories 8,88,68,774 11,52,02,941 26334167 -
Sundry Debtors 11,23,63,109 17,85,50,027 66186918 -
Cash &Bank 1,24,33,458 7,27,32,900 6029925442 -
Loans& Advances 28,17,26,538 59,86,51,897 316925359 -
Total Current Assets(a) 49,53,91,879 96,51,37,765

Current Liabilities:
Current Liabilities & 23,49,02,360 42,38,38,372

Provisions - 18,89,36,012
23,49,02,360 42,38,38,372
Working Capital a-b 26,04,89,519 54,12,99,393
Increase in Working Capital 28,08,09,874

28,08,09,874
54,12,99,393 54,12,99,393 46,97,45,886 46,97,45,886
Table-1

2010
Changes In Working Capital
2011
1200000000
1000000000
800000000
600000000
400000000
200000000
0
Total Total Working
Current Current Capital
Assets Liabilities
Sources: we have taken this information from Sri Sesha Sai, from 2010-2011
Interpretation:

Comparing the year 2010-2011 the current assets increased by 46,97,45,886
rupees compare the current liabilities 18,89,36,012 as a result working capital increase
28,08,09,874 rupees. Therefore short term financial position of The Financial Services
limited is good.
FUNDS FLOW STATEMENT FOR THE YEAR ENDED WITH

31.12.2011
Table-2
Amount Amount
Sources Rs. Uses Rs.
Funds from operations 12,06,57,250 Increase in Working capital 28,08,09,874
Long term loans 85,74,96,949 Purchase of fixed assets 113,41,49,337
Sale of Investments 40,02,17,536

Decrease in Miscellaneous 14,78,511
expenditure
Increase in Deferred tax liability 3,51,08,965
63,78,87,187 63,78,87,187
Interpretation:

The Financial Services limited take huge amount of Long term
loans through funds from operations and Sale of investments. The Financial Services
limited use some of these funds to purchase fixed assets. The Financial Services limited
has also used these funds to Increase working capital.

2011-2012
Rs. Rs. Rs.
Increase Decrease
Current Assets:
Inventories 11,52,02,941 16,15,83,313 4,63,80,372
Sundry Debtors 17,85,50,027 26,56,85,722 8,71,35,695
Cash &Bank 7,27,32,900 4,10,06,192 -

3,17,26,708
Loans& Advances 59,86,51,897 59,81,54,044 -
4,97,853
Total Current Assets(a) 96,51,37,765 106,64,29,271
42,38,38,372 74,94,16,641 -
Current Liabilities &
Provisions
42,38,38,372 74,94,16,641 32,55,78,269
Working Capital a-b

54,12,99,393 31,70,12,630
Decrease in Working Capital

22,42,86,763 22,42,86,763

54,12,99,393 54,12,99,393 35,78,02,830 35,78,02,83
Table-3
Table-3

2012
2011
Sri Sesha Sai Spinning Changes

Mills in 73
Page Working Capital
1000000000
800000000 Funds Flow Statement Analysis
600000000
Sources: we have400000000
taken this information from Sri Sesha Sai, from 2011-2012
u nt
o 200000000
m
Interpretation:
A
0
Comparing the year 2011-2012 Total
the current assetsTotal
increased by Working
10,12,91,506
Current
rupees compare the current liabilities 32,55,78,269 as aCurrent Capital
result working capital decrease
Assets Liabilities
22,42,86,763 rupees. There fore short term financial position of The Financial Services
limited is not good.

31.12.2012
Table-4
Amount Amount
Funds from operations 16,01,23,732 Redemption of shares 5,40,942
Long term loans 15,15,15,878 Purchase of fixed assets 21,69,98,475
Decrease in Working capital 22,42,86,763 Purchase of Investments 42,03,47,770
Decrease in Miscellaneous 10,76,442

expenditure
Increase in Deferred tax liability 10,08,85,372

63,78,87,187 63,78,87,187
Interpretation:
The Financial Services limited take huge amount of Long term
loans through funds from operations and Purchase of investments. The Financial
Services limited use some of these funds to purchase fixed assets. The Financial
Services limited is also use these funds to Decrease working capital.

2012-2013
Table-5
Rs. Rs. Rs.
Increase Decrease
Current Assets:
Inventories 16,15,83,313 21,89,56,216 5,73,72,903 -
Sundry Debtors 26,56,85,722 37,09,00434 10,52,14,712 -
Cash & Bank 4,10,06,192 11,21,52,347 7,11,46,155 -
Loans& Advances 59,81,54,044 62,82,93,656 3,01,39,612 -
106,64,29,271 133,03,02,653
Current Liabilities & 74,94,16,641 76,05,69,548 - 1,11,52,907

Provisions

74,94,16,641 76,05,69,548
31,70,12,630 56,97,33,105
Working capital a-b
Increase in working capital 25,27,20,475

25,27,20,475
56,97,33,105 56,97,33,105 26,38,73,382 26,38,73,382
Table-5

2012
Changes in Working Capital
2013
1400000000
1200000000
1000000000
800000000
600000000
400000000
200000000
0
Total Total Working
Assets Liabilities
Sources: we have taken this information from Sri Sesha Sai, from 2012-2013.
Interpretation:
Comparing the year 2012-2013 the current assets increased by 26,38,73,382
rupees compare the current liabilities 1,11,52,907 as a result working capital Increase
25,27,20,475 rupees. There fore short term financial position of The Financial Services
limited is good.

31.12.2013
Table-6
Amount Amount
Funds from operations 23,51,80,715 Increase in Working capital 25,27,20,475
Long term loans 27,31,74,976
Decrease in Miscellaneous 2,50,800 Purchase of fixed assets 22,58,55,400

expenditure
Purchase of Investments 4,56,00,000
Increase in Differed tax liability 1,55,69,384
52,41,75,875 52,41,75,875

Interpretation:
The Financial Services limited take huge amount of long term loans through
funds from operations and Purchase of investment. The Financial Services limited use
some of these funds to purchase fixed assets. The Financial Services limited is also use
these funds to increase working capital.

2013-2014
Table-7
Rs. Rs. Rs.
Increase Decrease
Current Assets:
Inventories 21,89,56,216 35,30,33,377 13,40,77,161 -
Sundry Debtors 37,09,00434 41,35,39,323 4,26,38,889 -
Cash & Bank 11,21,52,347 11,86,08,237 64,55,890 -
Loans& Advances 56,39,26,687 56,98,39,851 59,13,164 -
126,59,35,684 145,50,20,788
Current Liabilities & 69,62,02,579 102,90,32,147 - 33,28,29,568

Provisions
69,62,02,579 102,90,32,147
Total current Liabilities(b)

56,97,33,105 42,59,88,641
Working capital a-b
Decrease in working capital 14,37,44,464

14,37,44,464
56,97,33,105 56,97,33,105 33,28,29,568 33,28,29,568
Table-7
Changes in Working Capital
1600000000
1400000000
1200000000
1000000000
2013
800000000
2014
600000000
400000000
200000000
0
Total Total Working
Assets Liabilities

Interpretation: - Comparing the year 2013-2014 the current assets increased by
18,90,85,104 rupees compare the current liabilities 33,28,29,568 as a result working
capital Decrease 14,37,44,464 rupees. There fore short term financial position of The
Financial Services limited is not good.

31.12.2014
Table-8
Amount Amount
Funds from operations 99,81,84,829

Purchase of fixed assets 225,80,53,270
Increase in loans 118,07,66,087
Purchase of Investments 3,59,00,000
Decrease in Miscellaneous 89,747
expenditure Proposed Dividend 13,38,00,000
Decrease in Working capital 14,37,44,464
Increase in Deffered tax liability 10,49,68,143
242,77,53,270 242,77,53,270
Interpretation:

The Financial Services limited take huge amount of Long term loans through
funds from operations and Purchase of investment. The Financial Services limited use
some of these funds to purchase fixed assets. The Financial Services limited is also use
these funds to Decrease working capital.

FINDINGS:
It is found that The Financial Services limited is holding sufficient share capital.
It is inferred that The Financial Services limited is maintaining a minimum Cash

Balances.
.
In 2010-2011 the Working capital of The Financial Services limited is increased
by 28,08,09,874 rupees. In the same period the long term loans of The Financial
Services limited is high because the company get huge amount of funds from
operations and also from decrease in miscellaneous expenditure reserve. The
Financial Services limited uses that fund to redeem the shares and to purchase
fixed assets.
In 2011-2012 the Working capital of The Financial Services limited is decreased

by 22,42,86,763 but the flow of funds is decreased because The Financial
Services limited do not get any funds from decrease of reserves, The Financial
Services limited get funds only from operations and purchase of investment. The
Financial Services limited uses some of those funds to purchase fixed assets.
In 2012-2013 the Working capital of The Financial Services limited is increased

by 25,27,20,475 but the flow of funds is high as compared to previous year
because The Financial Services limited get funds only from operating activities.
The Financial Services limited use some funds to purchase fixed assets.

In 2013-2014 the Working capital of The Financial Services limited is decreased

by 14,37,44,464 but the flow of funds is high as compared to previous year
because The Financial Services limited get funds only from operating activities.
The Financial Services limited use some funds to purchase fixed assets

SUGGESTIONS:
It may be suggested that The Financial Services limited should utilize Limited
Funds for the purchase of fixed assets.
If The Financial Services limited spend more money on purchase of fixed assets
& investments it effects the growth of the Sri Sesha Sai Spinning Mills.
The company must maintain the sufficient working capital in order to meet the
daily needs of the firm.
The company should increase its investments and its fixed assets.
It has to keep concentration on working capital, expenses, and fixed assets.
It has to decrease its Long term loans (liabilities).
It is better to maintain the same steps which it has followed in 2010-11 to
decrease its liabilities and maintain the profit.


CONCLUSION
It can be concluded that funds flow performance of the financial
services limited is good because funds from operations are high in every year but
increase in loans of funds. The Financial services limited utilize some funds to purchase
fixed assets every year the financial services limited do some investment activities to
utilize funds effectively.


BIBLIOGRAPHY
Student hand book on cost accounting and financial management by B. Sarvana
Prasad, Edition-5thMay 2006, Page. No. 16.1 to 16.11
Financial Accounting & Finance by K. Rajeshwar Rao, G. Prasad, Edition-1998,
14.1 to 14.6, 15.1 to 15.12
Financial Management Theory & Practice by Prasanna Chandra, Edition-5th
2004, 727 to 758
Financial Management by I.M. Pandey, Edition -4th 2005, Page no 345 to 325
Sri Sesha Sai Annual reports from 2010-2014


Sri Sesha Sai Spinning Mills

BALANCE SHEET AS AT 31.3.2011
Particulars Schedule No. 2006
SOURCES OF FUNDS
Share holders Funds:
Share Capital A 13,43,40,942
Reserves and Surplus B 89,66,23,798
Loan Funds C
Secured Loans 94,03,76,495
Unsecured Loans 96,39,05,443
Deferred Tax Liability 24,78,34,769
Total 318,30,81,447
APPLICATION OF FUNDS
266,23,57,147
Fixed Assets D
55,57,90,567
Gross Block
Less: Depreciation
Net Block 210,65,66,665
Add: Capital works- in- progress 18,15,99,085

E
INVESTMENTS 228,81,65,665
F
Current Assets, Loans and Advances G
Inventories 35,21,99,400
Sundry debtors 11,52,02,941
Cash and Bank Balances 17,85,50,027
Loans and Advances 7,27,32,900

59, 86,51,897
96,51,37,765
Less: Current Liabilities and provisions 42,38,38,372

H
Miscellaneous Expenditure(to the extent 54,12,99,393
14,16,989

not return of or adjusted) I

318,30,81,4471,447
Total

SOURCES OF FUNDS
Loan Funds C
Total 360,34,29,217
316,89,56,316
Fixed Assets D
67,98,52,280
Gross Block
Less: Depreciation
Net Block 248,91,04,036

E
INVESTMENTS 250,51,64,140
F
Current Assets, Loans and Advances G

59,81,54,044
106,64,29,271

H
not return of or adjusted) 3,40,547

Total I
360,34,29,217,81,447

SOURCES OF FUNDS
Loan Funds C
Total 412,73,54,292
Fixed Assets D
320,81,62,454
Gross Block
82,53,36,717
Less: Depreciation
238,28,25,737
Net Block
E
273,10,19,540
82,65,11,900
INVESTMENTS F
Current Assets, Loans and Advances
G 21,89,56,216
Inventories
37,09,00,434
Sundry debtors
11,21,52,347
Cash and Bank Balances
56,39,26,687
Loans and Advances
126,59,35,684

H
not return of or adjusted) I 89,747

Total 412,73,54,292,81,447

SOURCES OF FUNDS
Loan Funds C
178,57,14,077
Secured Loans
173,23,88,532
Unsecured Loans
46,92,57,668
Deferred Tax Liability
627,74,73,351
Total
Fixed Assets D
398,46,31,393
Gross Block
98,12,21,831
Less: Depreciation
300,34,09,562
Net Block
198,56,63,248
Add: Capital works- in- progress E
498,90,72,810
86,24,11,900
INVESTMENTS F
Current Assets, Loans and Advances
G

145,50,20,788
H
not return of or adjusted) I ----

Total 627,74,73,35181,447

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.12.2011
INCOME
Sales J 385,65,72,118
(Increase/decrease) in Stock K -1,60,57,823
Total Income 384,05,14,295
EXPENDITURE
Manufacturing Expenses L 153,07,01,345
Cost of trading goods ---
Central Excise Duty 69,86,42,442
Sales Tax 55,90,24,763
Administrative and Selling Expenses M 58,82,88,777
Interest and Finance Charges 14,43,46,417
Depreciation 11,88,30,197
Miscellaneous Expenditure Written off E 22,32,340
Total Expenditure 364,20,66,281
Profit for the year F 19,84,48,014
Provision for taxation 152,54,699
G
Profit after Tax 18,31,93,315
Deferred Tax for the year 3,89,50,042
Fringe Benefit Tax for the year -----------
Prior period expenditure
11,56,849
Profit available for appropriations
14,30,86,424
Transfer to General Reserve
-----------
Proposed Dividend
-----------
Tax on Dividend I ------------
Profit brought forward from previous
56,76,50,645
year
Goodwill on Merger written off

Profit Carried to Balance Sheet -1,98,40,834

N 69,08,96,2351,447

INCOME
Sales J 452,87,19779
(Increase/decrease) in Stock K -98,74,875
EXPENDITURE
Cost of trading goods 32,67,699
Sales Tax 62,30,34,491
Provision for taxation 2,24,41,139
G
Fringe Benefit Tax for the year -------------
Prior period expenditure 27,41,325
Profit available for appropriations 16,01,23,733
Transfer to General Reserve -----------
Proposed Dividend ------------
Profit brought forward from previous year 69,08,96,235
Goodwill on Merger written off ----------

Profit Carried to Balance Sheet N 85,10,19,968447

INCOME
Sales J 640,97,93,371
(Increase/decrease) in Stock K 2,96,92,824
EXPENDITURE
Cost of trading goods 67,40,11,176
Sales Tax 63,36,87,866
G
Fringe Benefit Tax for the year 17,33,786
Prior period expenditure 45,05,648
Transfer to General Reserve -----------
Proposed Dividend ------------
Profit brought forward from previous year 85,10,19,968
Goodwill on Merger written off -------------
Profit Carried to Balance Sheet 108,62,00,683
N


INCOME
Sales J 914,46,59,562
(Increase/decrease) in Stock K 3,74,11,258
EXPENDITURE
Cost of trading goods 5,55,30,769
Sales Tax 94,83,24,696
Miscellaneous Expenditure Written off E 89,747
G
Fringe Benefit Tax for the year 22,35,543
Prior period expenditure 1,68,20,163
Transfer to General Reserve 15,00,00,000
Proposed Dividend 13,38,00,000
Tax on Dividend I 2,27,39,310
Profit brought forward from previous 108,62,00,683
year -----------
Goodwill on Merger written off
N
Profit Carried to Balance Sheet 180,05,85,512


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Funds Flow Statement Analysis

Sri Sesha Sai Spinning Mills Page 1

Sri Sesha Sai Spinning Mills Page 2

Sri Sesha Sai Spinning Mills Page 3

Sri Sesha Sai Spinning Mills Page 4

A funds flow statement is a technical device designed to analyze, the

as the reason why the company is experiencing difficulty in making payments to

creditors or why the bank balance is getting thinner.

There is a general recognition in industry and business and among

professional accounting bodies that financial statements should provide relevant

information which sub serves the multiple objectives of shareholders, investors,

of distribution and judge the efficiency of the management accordingly.

Sri Sesha Sai Spinning Mills Page 5

FUNCTIONS OF FINANCIAL MANAGEMENT

Sri Sesha Sai Spinning Mills Page 6

According to the dictionary meaning of the term Funds implies an

number of definitions of the term fund have been given.

transactions affect flow of cash at least later or sooner.

Meaning of Flow of Funds

Sri Sesha Sai Spinning Mills Page 7

NEED FOR STUDY

Sri Sesha Sai Spinning Mills Page 8

SCOPE OF THE STUDY

business enterprises between two dates.

This funds flow statement is a statement which indicates various means by

funds have been used during the period.

Mory defines research as a systematized effort to gain new knowledge.

Sri Sesha Sai Spinning Mills Page 9

The data was collected through primary and secondary sources.

Spinning Mills, Hyderabad from 2010-2011 to 2014-2015

It should remember that a funds flow statement is not a substitute of an income

statement or a balance sheet. It provides only some additional information as

regards changes in working capital

Sri Sesha Sai Spinning Mills only.

It cannot reveal continuous changes.

Sri Sesha Sai Spinning Mills Page 10

Sri Sesha Sai Spinning Mills Page 11

PARTIES INTERESTED IN FINANCIAL ANALYSIS

There are different parties interested in the financial analysis of these

the financial statements can be divided into two broad groups:

(a) Internal users

(b) External Users.

deep insight into the financial condition of the enterprise.

The Top Management of the concern is also interested in the analysis of

financial statements. It helps them in reaching conclusion on the following:

Is the firm in a position to meet its current obligations?

What sources of long-term finance are employed by the firm?

How efficiently does the firm use its assets?

Are the earnings of the firm adequate? etc.,

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and how safe the proposed investment will be.

of the firm to pay their dues in time.

decisions relating to purchase of goods.

in general and companies in particular in framing Macro-Economic policies.

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The financial statements, being a mirror of business conditions, are of great

interest to scholars understanding research in Accounting theory as well as business

affairs and practices.

Significance of Financial Analysis

To know the operational efficiency of the business.

Helpful in measuring the solvency of the firm.

Helpful in comparison of past and present results.

Helps in measuring the profitability.