Cash Flow Analysis

INTRODUCTION TO TOPIC
I.1 INTRODUCTION
Cash flow analysis is the study of the business cash inflows and outflows, with the
purpose of maintaining an adequate cash flow for the business, and to provide the basis
for cash flow management. Cash flow analysis involves examining the components of the
business that affect cash flow, such as accounts receivable, inventory, accounts payable,
and credit terms.
By performing a cash flow analysis on these separate components, you'll be able to more
easily identify cash flow problems and find ways to improve your cash flow. Cash-flow
in financial analysis means net income or profit obtained after adding back expense items
which currently do not use cash such as depreciation.
It may also exclude revenue items, which do not currently provide funds. It comes in two
varieties — gross and net. Depreciation is not a tangible expense which is paid for by
drawing a cheque but is a sum set aside each year, whether there is profit or not, for the
replacement of an asset when it is worn-out. Such sums of money can be used to buy new
plant or they can be kept in a bank, invested in gilt-edged securities or used in any way
that the directors may choose. They, in fact form part of the “cash-flow” which is the
amount retained in the business after paying off all expenses including taxes and
dividends.
Gross cash-flow is the net profit after tax plus the provision for depreciation. Net cash-
flow is obtained from the gross figure by deducting the amount distributed as dividend on
preference and ordinary shares. Of the two, net cash-flow is the more important and
commonly used because it represents the actual amount of cash retained in the business
after all outgoings including dividends.
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Definition
“The difference between the available cash at the beginning of an accounting period and
that at the end of the period”. Cash comes in from sales, loan proceeds, investments and
the sale of assets and goes out to pay for operating and direct expenses, principal debt
service, and the purchase of asset.
I.2 OBJECTIVES OF THE STUDY:
 To analyze cash flow statements of Sivashakthi Bio-Planttec limited from 2003 to

2008.
 To know the cash flow in operating, investing and financing activities.
 To asses the ability of the enterprise to generate and use cash and cash
equivalents.
 To examine the relationship between profitability and net cash flow and the
impact of changing prices.
 To suggest the company for improving short term and long term financial
positions.
I.3. IMPORTANCE OF THE STUDY:

A cash flow statement is an important financial tool for management in efficient, short-
term financial planning. It enables the management to plan and co-ordinate the operation
of the concern, and furnishes the basis for evaluating the financing polices.
It helps the management in making the financing problems of the business much more
manageable. The following are the uses of the cash flow analysis.
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 Helpful in efficient cash management:
It is very helpful in understanding the cash position of the firm. Since cash is basis
for carrying on business operations, the cash flow statements is very useful in
evaluating the current cash position.
 Planning of programmers:-
The repayment of loans, replacement of assets and other such programmers can
be planned on its basis.
 Helpful in short term financial decisions:

The cash flow statement is helpful in making short-term financial decisions
relating to liquidity, and the ways and means position of the firm.
 Useful in capital budgeting:

Cash flow statement is also useful for making appraisal of different capital
investment projects in order to determine their viability and profitability.
 Useful as a control device:

It helps the management to understand the past behavior of the cash cycle, and to
control the uses of cash in future. A comparison of the projected cash flow
statements helps the management in appraising the inflows and outflows of cash
according to the plan and taking the necessary remedial measures.
 Useful to outsiders:
Cash flow statement is also very useful to external analysts like bankers, creditors
etc., for assessing the short-term solvency of a business concern as well as its
capacity to meet its short-term obligations.
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I.4. NEED FOR THE STUDY
A cash flow statement is the motor oil for any business finance engine. It measures the
amounts of money that come into a company and out of it over a given time period. This
way a company is able to keep track of how much cash it has on hand to pay expenses
and buy assets.
Some people might confuse a cash flow statement with an income statement. An income
statement only measures whether or not the company made a profit, whereas a cash flow
statement can tell you whether or not the company generated c ash during the time
period. These concepts may seem a bit confusing. Just because a company has generated
cash does mean that it has generated profit and vice versa. Cash flow statements work
particularly with cash where as income statement s may also deal with assets.
Cash flow statements use information from both income statements and balance sheets.
Using this information, the cash flow statement will reveal the net increase or decrease in
cash for the period.
I.5. SCOPE OF THE STUDY:
An entity is required to prepare a cash flow analysis in accordance with the requirement
of the standard and to present it as an integral part of its financial statement for each
period for which financial statement are presented. The users of financial statement are
interested in how an entity generated and uses cash and cash equivalents
I.6. RESEARCH METHODOLOGY

Data sources:
1. Primary data:
The data is collected by holding discussions and interviews with the relevant
persons of the company. i.e. Accounting manager of financial department
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2. Secondary data:
The data and information required for the present study is mainly acquired from
the annual reports of Sivashakthi Bio-Planttec limited. For the period 2003-2008,
information was also extracted from internet.
I.7. LIMITATIONS OF THE STUDY:
Every study will have its own limitations. The present study is also carried out
with the following limitations.
 The data source is mainly based on annual reports only.
 Non-Cash Transactions are ignored in cash flow analysis
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COMPANY PROFILE
II.1.An Overview of Sivashakthi Bio-Planttech Ltd.
Sivashakthi Bio Planttech Ltd. is founded by Sri G V Anjeneylu in the year 1996.The
company started its business initially in Vijayawada on a small note, producing and
selling genetically superior high quality Teak plants. Over the years the company has
added new products like Horticulture plants and hygrow Organic Manures. The
horticulture hybrid varieties include Mango, Sapota, Amla and Pomegranate and the
organic manure is marketed with a brand name "Vijaya Growmin". The company is
proud to have introduced high density planting, which is a modern farming method in the
country thereby helping the farmers to reap the yield three times more compared to the
conventional methods of farming.
The company has been showing excellent results year after year, developing a wide
customer base throughout the country. The company has created a niche for itself in the
market with its high quality products and customer service. The company provides
technical guidance and after sales service to its customers through qualified and dedicated
agriculture officers for better yields.
Adopting a policy of one-to-one relationship with the farming community, the company
has been selling its products to farmers directly through its own marketing network.
Today it boasts of spreading its operations to 14 states in the country having 116branch
offices.
The strength of manpower has increased from 15 to 4,500 and the sales turnover has gone
up from 15 lakhs to 66 crores. Now the company is set to cross a major milestone of Rs.
114 crore turnovers in the current year. Buoyed with the tremendous response and
encouragement it received from the farming community, the company has embarked on a
massive expansion plan to increase its production capacities. It has established 4 new
production units recently at Mandya (Karnataka), Pune (Maharastra), Balarampur and
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Gajaroula (U.P) and commenced Organic fertilizer production. One other new unit at
Gokak, Karnataka is on anvil. The company's future plans include introduction of plant
growth promoters, wetting agents, soluble fertilizers, foliar fertilizers and micro nutrients
into the market shortly. It also has plans to export organic manures and introduce
innovative home appliances.
II.2. History of the organization

Sivashakthi Bioplanttec Ltd was established in the year 1996. The focus of their
company has been the economic growth of the Farming community of the Country,
as agriculture is the backbone of their economy.
Sivashakthi has revolutionized the way modern farming is carried out with its production
and marketing of Genetically superior and high yielding Teak and Horticulture plants like
Mango, Sapota, Amla etc
II.3.BUSINESS OVERVIEW
Sivashakthi Bio Planttec Limited was incorporated on 12th January 1996 with the main
objective of Production and marketing of high quality of teak wood saplings. Later on it
started production of Horticulture plants and recently it has started the manufacturing and
marketing of cercal protein Hydrolyses based Plant Growth Promoters. The company has
mainly 3 production categories viz., Teak Saplings, Horticulture saplings and Plant
Growth Promoters. The Individual production capacities of these products are as under.
1. Teak Saplings - 25 Lakhs /annual
2. Horticulture Saplings
- Mango - 5 Lakhs/Annual
- Amla - 5 Lakhs/Annual
- Sapota - 5 Lakhs/Annual
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- Pomegranate - 2.5 Lakhs/Annua
3. CPH based Plant Growth Promoters
- Liquid Form - 10 Lakhs Kl/annual

- Granule Form - 100 MT/Annual
Since Production of planting materials like Teak & Horticulture plants is as unorganized
sector, presently there are no rules/regulations or any registering authority. As such there
are no restrictions to carry on production & marketing of the above planting materials
The Company started its operation in 1998, during 1998 only one branch at Vijayawada
with 6 employees.
Till recently up to October 2005 the company production the teak sapling by processing
stumps from various sources like forestry, private nurseries, farmers due to which there
were variations in the final products. Since lot of grading have to been done to obtain un-
form product cost production comparatively higher.
Later company thought its R & D Department in collaboration with leading scientists in
this field conducted an elaborate survey and successfully identify certain areas in
different parts of the country to obtain seed material. These seeds are collected from best
growing and early maturing plus trees. The Plus trees are mother tree have the following
characters.
• They have straight main stump

• These trees grows straightly
• Have high degree of resist to pests and dieses
• They have known to yield superior quality timber
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Sivashakthi teak saplings are now produced from the seeds of such plus trees or mother
trees. Sivashakthi as selected mother orchards in states of Maharashtra, Andhra Pradesh,
Karnataka, Madhya Pradesh, Uttar Pradesh
Here the Plus trees are selected and the seeds from such trees are collected from for
further production using modern propagation and green house technology.
The Company has 4 Production Centers at Sangaluru, Lucknow, Indore, Bhubaneswar

exclusively to produce stumps through the seeds collected from mother orchards. Here
the main purpose is to select best growing and uniform plants. This is achieved through
separation of slow growing and un uniform plants of different stages right after seed
germination till stumps formation stage. Overall there will be 2 to 3 grading to achieve
uniform quality stumps. These Stumps are transfer to secondary production centre for
further raising of seedlings in poly bags.
Presently The Company having 11 production centers to raise the saplings from stumps.
Here the main objective is again to select the best quality seedlings the respect uniform
growth and vigor of the seedlings.
II.4. PRODUCTION PROCESS
FOR TEAK SEEDING:

The process involved in production of high quality Teak seedlings can be described as
follows:
1) In the first step, areas where there is a presence of predominately high number of
fast growing, high Vigo red, high quality timber yielding Teak trees are identified
in the natural forest areas across the country like western Gnats go Karnataka,
Karalla, Maharashtra ,Eastern parts of Andhra Pradesh , Madhya Pradesh,
Jharkhand, Uttar Pradesh and Bihar. The areas are earmarked as mother orchards.
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2) From these Mother Orchards specific trees are identified with known characters
such as faster rate of growth, high degree of resistance to pests and diseases and
which yield high quality timber. These trees are earmarked as “Plus Trees” or
Mother Trees.
3) During February-March which is a season for collection of the seeds, the seeds
from these plus trees are collected from different Mother Orchards.
4) Seeds treatment is given to break the Dormancy of the seeds by coating the seeds
with cow-dung slurry and subjecting them to alternate wetting and drying cycles.
5) These treated seeds are dried under shade and sown on raised feds containing
proper mixture of top soil, compost & sand to facilitate better germination. This is
done in the month of April-May.
6) Germination takes place with in 30-40 days. The germination % rises between 60-
80% depending upon nursery management practices & the seed quality. Here
those seeding which germinate early having good vigor and retained and slowly
germinating with low vigor and descended.
7) Preparation of stumps
Seeding which 12-15 months old with colon die motor of about 2.5to 4cm are
used for preparation of stumps for preparation of stumps the seeding is be headed
1cm above the color and routs are tremended further these stumps are transported
to secondary production centre.
8) Planting of stumps:
The stumps received from primary production centre are painted in poly Bags
under plastic tunnels to facilitate faster growth.
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9) Proper care is taken by spraying pesticides & fungicides to see that the plants
remain healthy.
10) Here again grading is done by selecting the fast growing vigorous and healthy
plants and rejecting the slow growing low Vigo red and unhealthy disease
affected plants.
11) Only the best quality healthy and vigorous plants are dispatched once they attain
6-8 leaf stage with 1-1 1/2ft height.
Special features of Sivashakthi’s Teak Seeding
Sivashakthi’s Teak plants have the following special characters.

1) Plants grow straight in a balanced proportion
2) The main step develops into a very strong trunk with less no of side branches
3) They have got comparatively high degree of resistance to pests & diseases than
ordinary teak plants.
4) They yield attractive wood with good color & high quality
Sivashakthi’s special package to the customers:

1) Company provides these plants at the door steps of the customers with absolutely
no additional transport cost
2) Free technical service is provided to the customers through a team of well

qualified agricultural officers once in 6 months
3) As a gesture of good will and to field a long lasting with the customers,
sivasakthi provides one-time free replacements for the dead plants even to the
extent of 100%
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4) Replacement plants are also delivered to the door steps of the customers totally
free of cost
5) Service on call: - Whenever the customers require company’s technical

assistance they can call their branch officers and they shall be attended by their
technical experts over phone
VALUES
1) QUALITY:
Sivashakthi commit them selves to constantly improve them selves, their products and
services so as to become the best.
2) LEADERSHIP:
They commit to set highest standards in their business.
3) POSITIVE ATTITUDE:
They believe that remaining positive and looking ahead is essential to achieve goals.
4) WORK ENVIRONMENT:
They build a motivating work place where people can realize their professional
ambitions.
5) SOCIETY:
They want to contribute to society through economic contributions, positive benefits of
their customers.
6) ISO 9001-2000 CERTIFICATION

They commit them selves to get all their products certified as per ISO Standards
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II.5.A PROFILE OF SIVA SHAKTHI BIO PLANTTEC LIMITED
Opening the Door to new possibilities:
As natural resources and utilities transform economics, Indian agriculture will play an
increasingly vital role in connecting the farming community and the technology
necessary for growth.SIVASHAKTHI operates at the very center of this vast change,
and as a catalyst for progress, fosters entrepreneurship, innovation, efficiency and
economic reform. To succeed, they must remain nimble and ready to combine capital
with strategic advice to play a constructive role for their clients.
In any business environment, however, certain tenets of their firm remain absolute. A
dedication to their customers, a determination to attract and develop talent with
unsurpassed expertise and a commitment to their culture of excellence team work and
integrity.SIVASHAKTHI with this as focus, they believe they will be well positioned
not only to respond change but to anticipate it in ways that best serve their clients for
value addition, to their shareholders for enhancing their funds and to society at for a
growth.
MISSION:
To achieve their objectives in an environment of fairness, honesty and courtesy
towards their customers, employees, vendors and society at large. Guided by this
inspiring credo, they hope to reach many more milestones in endeavors for the quality
of human life and the environment
VISION:
Sivashakthi is a market leader excelling in business, delighting the customers with
superior quality products and services with a team of highly competent, committed
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professionals, respected for ethical business practices and proud of contributing to
economic growth of India.
FIVE CORE VALUES:
SIVASHAKTHI has always sought to be a value driven organization. These values

continue to direct the company’s growth and prosperity. The five core values
underpinning the way they do their business are:
1) Integrity:
Sivashakthi conduct their business fairly, with honesty and transparency. Everything
they do must stand the best of public scrutiny.
2) Understanding:
Sivashakthi caring, show respect, compassion and humanity for their colleagues and
customers and always work for the benefit of the communities they serve.
3) Excellence:
They constantly strive to achieve the highest possible standards in their day-to-day
work and in the quality of goods and services they provide.
4) Unity:
They work cohesively with their colleagues and customers in building strong
relationship based on tolerance, understanding and mutual cooperation.
5) Responsibility:
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They continue to be responsible, sensitive to the communities and environments in
which they work, always ensuring that what comes from the people goes back to the
people many times over.
PURPOSE:
At SIVASHAKTHI, their purpose is to improve the quality of life of the communities
they serve. They do this through leadership in sector of national economic significance,
to which the company brings a unique set of capabilities. This requires them to grow
aggressively in their focused area of business. Their heritage of returning to society what
they earn evokes trust among consumers, employees, shareholders and the community.
This heritage is being continuously enriched by formalization of high standards of

behavior expected from employees. SIVASHAKTHI name is a unique asset
representing leadership with trust. Leveraging this asset to enhance their
competitiveness is the route to sustained growth and long-term success.
CULTURE:
Their culture is difficult to describe in words, let alone a paragraph. It is lived. It did not
appear overnight, but it is a product of their history. Its hallmarks-excellence, teamwork
and integrity –are grounded in strong business judgment and accountability. They
believe that talent and motivation can be exponentially more powerful in an environment
of mutual respect, trust and collaboration.
THEIR FUTURE:
In the course of SIVASHAKTHI’S history, the firm has developed FOUR underlying
strengths that serve them well today and will, they trust, do so in future, THEIR
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excellent relationship with the farming community, that they believe they are second to
none, THEIR best research and development wing and management capabilities and
THEIR culture that allows them to attract, develop, motivate and retain exceptional and
encourages them to work together in a real spirit of team work.
Looking ahead they see favorable conditions buoyed by economic growth and they
believe they are well suited to participate in the growth. They are committed to
providing their shareholders with return of equity at or near the top of their industry
while continuing their successful record of near the top of their industry while
continuing their successful record of growing book value and earning per share.
FOCUS:
 To achieve a minimum turnover of Rs. 5 billion by the year 2009

 To concentrate on high value & low volume fertilizers.
 To establish a minimum of 10 production units in every state of India.
 To increase the current market share and remain as market leader.
 To explore business opportunities in overseas markets.
 To increase the product base from 10 to 25 by 2008.
 To diversify into Bio Technology and Bio Medicines.
THEIR APPROACH TO GROWTH
INNOVATION & CREATIVITY:
They have reinvented themselves many times in the services they provide to their
customers and it is that reinvention and creativity that keeps them alive. Customers tell
them that the quality of their teamwork across their products and after sale services
makes real differences to them. As a result, when markets expand and customers grow,
they tend to grow with them.
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TALENTED MANPOWER
They belive that their strategy for continuous growth is best executed by giving talented
people the resources they need to build new and existing business. They have found that
high-quality talent is the most important driver of growth over time. They have
demonstrated that over the long tem, their approach can outperform the competition,
creating value for their shareholders and career opportunities for their people.
RESEARCH AND DEVELOPMENT
The heart of SIVASHAKTHI’S research and development is their product pipeline.

Their pipeline is an engine for discovering and developing the next generation of
commercial products. During the previous year the company invested substantial
amounts in researching new solutions for growers. The company concentrates the vast
majority of its Research-and –Development (R&D) efforts on new biotech traits, elite
germplasm, breeding, new variety and hybrid development and genomic research. Other
R&D projects support the company’s current products.
ALL INNER COMPANIES
• Sivashakthi Bio Partech Ltd.( SSBPL)
• V N Fertichem Limited(VNFL)
• Victor Fertilizers Limited(VFL)
• Victor Agri Industries Limited (VAIL)
• Victor Agri Agencies Private Limited(VAAPL)
• Victor Technologies Limited(VAL)
• Nava-Barat Fertilizers Limited(NBFL)
• Victor Homes Limited(VHL)
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II.7. ORGANIZATION CHART
Illustration II.1
CHIEF MENTOR
MANAGING DIRECTOR CHAIR PERSON
VICE PRESIDENT
1. 2. 3. 4. 5. 6.
SENIOR SENIOR SENIOR SENIOR SENIOR SENIOR
GENERAL MANAGR MANAGER MANAGER MANAGER MANAGER
MANAGER HUMAN ACCOUNTS INFORMATI ON TAXATION INTERNAL
RESOURE TECHNOLOGY AUDIT
1. 2. 3. 4.
DEPUTY DEPUTY DEPUTY DEPUTY
GENERAL GENERAL GENERAL GENERAL
MANAGER MANAGER MANAGER MANAGER
RESEARCH
FINANCE AND PRODUCTION ADMINISTRATION
AND
ACCOUNTS DEVELOPMENT
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REVIEW OF LITERATURE
III.1.INTRODUCTION TO CASH FLOW STATEMENTS
Cash flow is essentially the movement of money into and out of your business; it's the
cycle of cash inflows and cash outflows that determine your business' solvency. Cash
flow analysis is the study of the cycle of your business' cash inflows and outflows, with
the purpose of maintaining an adequate cash flow for your business, and to provide the
basis for cash flow management.
Cash flow analysis involves examining the components of your business that affect cash
flow, such as accounts receivable, inventory, accounts payable, and credit terms. By
performing a cash flow analysis on these separate components, you'll be able to more
easily identify cash flow problems and find ways to improve your cash flow.
Cash-flow in financial analysis means net income or profit obtained after adding back
expense items which currently do not use cash such as depreciation. It may also exclude
revenue items, which do not currently provide funds. It comes in two varieties — gross
and net.
Depreciation is not a tangible expense which is paid for by drawing a cheque but is a sum
set aside each year, whether there is profit or not, for the replacement of an asset when it
is worn-out. Such sums of money can be used to buy new plant or they can be kept in a
bank, invested in gilt-edged securities or used in any way that the directors may choose.
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They, in fact form part of the “cash-flow” which is the amount retained in the business
after paying off all expenses including taxes and dividends.
Gross cash-flow is the net profit after tax plus the provision for depreciation. Net cash-
flow is obtained from the gross figure by deducting the amount distributed as dividend on
preference and ordinary shares. Of the two, net cash-flow is the more important and
commonly used because it represents the actual amount of cash retained in the business
after all outgoings including dividends.
It is frequently assumed that there will always be a cash-flow at least equal to the
provision for depreciation or other adjustments not involving cash. This will be true only
if the total revenue (sales and other income) for a period fully covers all of the expenses
including depreciation and other write-offs. If the operations for a period result in a loss
and if the loss exceeds the “non-cash” adjustments, the cash-flow will be negative instead
of being positive.
CONCEPT OF CASH FLOW STATEMENT

Cash Flow Statement
Cash flow statement may provide considerable information about what is really
happening in a business beyond that contained in either the income statement or the
balance sheet. Analyzing this statement should not present an intimidating task; instead it
will quickly become obvious that the benefits of understanding the sources and uses of a
company’s cash far outweigh the costs of undertaking some very straightforward
analyses.
Format of the Cash Flow Statement

• The cash flow statement is divided into three sections:
 Cash flow from operating activities: shows the results of cash inflows and
outflows related to the fundamental operations of the basic line or lines of
business in which the company engages. (Example: cash receipts from the sale of
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goods or services and cash outflows for purchasing inventory and paying rent and
taxes.)
 Cash flow from investing activities: associated with purchases and sales of non-
current assets (Example: building and equipment purchases or sales of
investments or subsidiaries.)
 Cash flow from financing activities: associated with financing the firm (Example:
selling and paying off bonds and issuing stock and paying dividends)
• Exceptions:
 Short-term marketable securities are treated as long-term investments and appear
in cash flow from investing activities
 Short-term debt is treated as long-term debt and appears in cash flow from
financing activities
 Although dividends are handled as a cash outflow in the cash flow from financing
activities section, interest payments are considered an operating outflow, despite
the fact that both are payments to outsiders for using their money.
BENEFITS OF THE CASH FLOW
Critics point out that the term cash-flow, meaning net profit inclusive of the provision for
depreciation and similar non-cash transactions, is a misnomer since it implies that
because of the write-back of expense items like depreciation which do not currently use
cash, additional cash has flown into the business when nothing of the sort has really
happened. All that has been achieved by adding back to the net profit the provision for
depreciation and other non-cash transactions is to put on a cash basis the annual accounts
originally written on the accrual basis.
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The critics, nevertheless, admit that cash-flow is a valid analytical tool which, whe
correctly used, helps explain:
1. How companies are able to finance large-scale expansion or modernization, or

repay heavy borrowings without resorting to fresh equity financing, and
2. Reconcile the difference in the net profit of companies operating within the
same industry and otherwise comparable on the basis of their capitalizations,
product-mix, and over-all management policies.
The revenue earned by a company from its operations appears on its profit and loss
account for the year as “Sales and Other Income”. After deducting from this the expenses
of the business including depreciation and income tax, there is left a balance commonly
termed the net profit (or loss) for the year.
But, unlike the out of pocket expenses like raw material costs, salaries, wages, etcetera,
depreciation and similar provisions do not represent current outlays of cash. To arrive at
the true spending power generated through operation it is necessary to add back to the net
profit the items which do not constitute either a source or a disposition of cash such as
depreciation which is one of the heaviest “expense” items listed on the profit and loss
account.
III.2. PREPARATION AND PRESENTATION OF CASH FLOW STATEMENT
The presentation of cash flow statement is carried out in two alternative formats that are
either through direct method or indirect method. The difference in these two methods lies
in their presentation of ‘Cash flows from operating activities’. In the direct method,
operating cash receipts and payments are reported directly. In the indirect method, cash
flows from operating activities are reported by way of adjustments of the reporting
period’s net profit reported in the profit and loss account.
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Definitions:
The following terms are used in this statement with the meanings specified:
• Cash comprises cash on hand and demand deposits with banks.
• Cash equivalents are short term, highly liquid investments that are readily
convertible into known amounts of cash and which are subject to an insignificant
risk of changes in value.
• Cash flows are inflows and outflows of cash and cash equivalents.
• Operating activities are the principal revenue-producing activities of the
enterprise and other activities that are not investing or financing activities.
• Investing activities are the acquisition and disposal of long-term assets and other
investments not included in cash equivalents.
• Financing activities are activities that result in changes in the size and
composition of the owner’s capital and borrowings of the enterprise.
Cash and Cash equivalents:
Cash equivalents are held for the purpose of meeting short-term cash commitments rather
than for investment or other purposes. For an investment to qualify as a cash equivalent,
it must be readily convertible to a known amount of cash and be subject to an
insignificant risk of changes in value. Therefore, an investment normally qualifies as a
cash equivalent only when it has a short maturity of, say, three months or less from the
date of acquisition.
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Investments in shares are excluded from cash equivalents unless they are, in substance,
cash equivalents; for example, preference shares of a company acquired shortly before
their specified redemption date.
Cash flows exclude movements between items that constitute cash or cash equivalents
because these components are part of the cash management of an enterprise rather than
part of its operating, investing and financing activities. Cash management includes in
investment of excess cash in cash equivalents.
III.3.PRESENTATION OF A CASH FLOW STATEMENT
The cash flow statement should report cash flows during the period classified by
operating, investing and financing activities.
An enterprise presents its cash flows from operating, investing and financing activities in
a manner which is most appropriate to its business. Classification by activity provides
information that allows users to assess the impact of those activities on the financial
position of the enterprise and the amount of its cash and cash equivalents. This
information may also be used to evaluate the relationships among those activities.
A single transaction may include cash flows that are classified differently. For example,
when the installment paid in respect of a fixed asset acquired on deferred payment basis
includes both interest and loan, the interest element is classified under financing activities
and the loan element is classified under investing activities.
1. Operating Activities
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The amount of cash flows arising from operating activities is a key indicator of the
extent to which the operations of the enterprise have generated sufficient cash flows to
maintain the operating capability of the enterprise, pay dividends, repay loans and make
new investments without recourse to external sources of financing. Information about the
specific components of historical operating cash flows is useful, in conjunction with other
Information, in forecasting future operating cash flows.
Cash flows from operating activities are primarily derived from the principal revenue-
producing activities of the enterprise. Therefore, they generally result from the
transactions and other events that enter into the determination of net profit or loss.
Examples of cash flows from operating activities are:
(a) Cash receipts from the sale of goods and the rendering of services;
(b) Cash receipts from royalties, fees, commissions and other revenue;
(c) Cash payments to suppliers for goods and services;
(d) Cash payments to and on behalf of employees;
(e) Cash receipts and cash payments of an insurance enterprise for premiums and claims,
annuities and other policy benefits;
(f) Cash payments or refunds of income taxes unless they can be specifically identified
with financing and investing activities; and
(g) Cash receipts and payments relating to futures contracts, forward contracts, option
contracts and swap contracts when the contracts are held for dealing or trading purposes.
Some transactions, such as the sale of an item of plant, may give rise to a gain or loss
which is included in the determination of net profit or loss. However, the cash flows
relating to such transactions are cash flows from investing activities
An enterprise may hold securities and loans for dealing or trading purposes, in which
case they are similar to inventory acquired specifically for resale. Therefore, cash flows
arising from the purchase and sale of dealing or trading securities are classified as
25
operating activities. Similarly, cash advances and loans made by financial enterprises are
usually classified as operating activities since they relate to the main revenue-producing
activity of that enterprise.
2. Investing Activities
The separate disclosure of cash flows arising from investing activities is important
because the cash flows represent the extent to which expenditures have been made for
resources intended to generate future income and cash flows. Examples of cash flows
arising from investing activities are:
(a) Cash payments to acquire fixed assets (including intangibles). These payments
include those relating to capitalized research and development costs and self-constructed
fixed assets;
(b) Cash receipts from disposal of fixed assets (including intangibles); Cash Flow
Statements
(c) cash payments to acquire shares, warrants or debt instruments of other enterprises and
interests in joint ventures (other than payments for those instruments considered to be
cash equivalents and those held for dealing or trading purposes);
(d) cash receipts from disposal of shares, warrants or debt instruments of other
enterprises and interests in joint ventures (other than receipts from those instruments
considered to be cash equivalents and those held for dealing or trading purposes);
(e) Cash advances and loans made to third parties (other than advances and loans made
by a financial enterprise);
(f) Cash receipts from the repayment of advances and loans made to third parties (other
than advances and loans of a financial enterprise);
26
(g) cash payments for futures contracts, forward contracts, option contracts and swap
contracts except when the contracts are held for dealing or trading purposes, or the
payments are classified as financing activities; and
(h) Cash receipts from futures contracts, forward contracts, option contracts and swap
contracts except when the contracts are held for dealing or trading purposes, or the
receipts are classified as financing activities.
When a contract is accounted for as a hedge of an identifiable position, the cash flows of
the contract are classified in the same manner as the cash flows of the position being
hedged.
3. Financing Activities
The separate disclosure of cash flows arising from financing activities is important
because it is useful in predicting claims on future cash flows by providers of funds (both
capital and borrowings) to the enterprise.
Examples of cash flows arising from financing activities are:

(a) Cash proceeds from issuing shares or other similar instruments;
(b) Cash proceeds from issuing debentures, loans, notes, bonds, and other short or
long-term borrowings; and
(c) Cash repayments of amounts borrowed.
III.4. REPORTING OF CASH FLOWS
a) Reporting Cash Flows from Operating Activities

An enterprise should report cash flows from operating activities using either:
27
i. The direct method, whereby major classes of gross cash receipts and gross cash
payments are disclosed; or
ii. The indirect method, whereby net profit or loss is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals of past or future
operating cash receipts or payments, and items of income or expense associated
with investing or financing cash flows.
The direct method provides information which may be useful in estimating future cash
flows and which is not available under the indirect method and is, therefore, considered
more appropriate than the indirect method. Under the direct method, information about
major classes of gross cash receipts and gross cash payments may be obtained either:
(a) From the accounting records of the enterprise.
(b) By adjusting sales, cost of sales (interest and similar income and interest expense
and similar charges for a financial enterprise) and other items in the statement of
profit and loss for:
i) Changes during the period in inventories and operating receivables and payables;
ii) Other non-cash items; and
iii) Other items for which the cash effects are investing or financing cash flows.
Under the indirect method, the net cash flow from operating activities is determined by
adjusting net profit or loss for the effects of:
(a) Changes during the period in inventories and operating receivables and payables;
(c) Non-cash items such as depreciation, provisions, deferred taxes and unrealized
foreign exchange gains and losses; and
(d) All other items for which the cash effects are investing or financing cash flows.
28
Alternatively, the net cash flow from operating activities may be presented under the
indirect method by showing the operating revenues and expenses excluding non-cash
items disclosed in the statement of profit and loss and the changes during the period in
inventories and operating receivables and Payables.
• Extraordinary Items
The cash flows associated with extraordinary items should be classified as arising from
operating, investing or financing activities as appropriate and separately disclosed.
The cash flows associated with extraordinary items are disclosed separately as arising
from operating, investing or financing activities in the cash flow statement, to enable
users to understand their nature and effect on the present and future cash flows of the
enterprise. These disclosures are in addition to the separate disclosures of the nature and
amount of extraordinary items required by Accounting Standard (AS) 5, Net Profit or
Loss for the Period, Prior Period Items and Changes in Accounting Policies.
• Interest and Dividends

Cash flows from interest and dividends received and paid should each be disclosed
separately. Cash flows arising from interest paid and interest and dividends received in
the case of a financial enterprise should be classified as cash flows arising from operating
activities. In the case of other enterprises, cash flows arising from interest paid should be
classified as cash flows from financing activities while interest and dividends received
should be classified as cash flows from investing activities. Dividends paid should be
classified as cash flows from financing activities.
The total amount of interest paid during the period is disclosed in the cash flow statement
whether it has been recognized as an expense in the statement of profit and loss or
capitalized in accordance with Accounting Standard (AS) 10, Accounting for Fixed
Assets. Interest paid and interest and dividends received are usually classified as
operating cash flows for a financial enterprise. However, there is no consensus on the
29
classification of these cash flows for other enterprises. Some argue that interest paid and
interest and dividends received may be classified as operating cash flows because they
enter into the determination of net profit or loss. However, it is more appropriate that
interest paid and interest and dividends received are classified as financing cash flows
and investing cash flows respectively, because they are cost of obtaining financial
resources or returns on investments.
Some argue that dividends paid may be classified as a component of cash flows from
operating activities in order to assist users to determine the ability of an enterprise to pay
dividends out of operating cash flows. However, it is considered more appropriate that
dividends paid should be classified as cash flows from financing activities because they
are cost of obtaining financial resources.
• Taxes on Income
Cash flows arising from taxes on income should be separately disclosed and should be
classified as cash flows from operating activities unless they can be specifically identified
with financing and investing activities.
Taxes on income arise on transactions that give rise to cash flows that are classified as
operating, investing or financing activities in a cash flow statement. While tax expense
may be readily identifiable with investing or financing activities, the related tax cash
flows are often impracticable to identify and may arise in a different period from the cash
flows of the underlying transactions. Therefore, taxes paid are usually classified as cash
flows from operating activities. However, when it is practicable to identify the tax cash
flow with an individual transaction that gives rise to cash flows that are classified as
investing or financing activities, the tax cash flow is classified as an investing or
financing activity as appropriate. When tax cash 5 Pursuant to the issuance of AS 16
Borrowing Costs, which came into effect in respect of accounting periods commencing
on or after 1-4-2000, accounting for borrowing costs is governed by AS 16 from that
date.
30
b) Reporting Cash Flows from Investing and Financing Activities
An enterprise should report separately major classes of gross cash receipts and gross
cash payments arising from investing and financing activities, except to the extent that
cash flows are reported on a net basis.
Reporting Cash Flows on a Net Basis
1) .Cash flows arising from the following operating, investing or financing activities
may be reported on a net basis:
(a) Cash receipts and payments on behalf of customers when the cash flows
reflect the activities of the customer rather than those of the enterprise; and
(b)Cash receipts and payments for items in which the turnover is quick, the
amounts are large, and the maturities are short.
2) Examples of cash receipts and payments referred to in paragraph 1(a) are:

(a) The acceptance and repayment of demand deposits by a bank;
(b)Funds held for customers by an investment enterprise; and
(c) Rents collected on behalf of, and paid over to, the owners of properties.
Examples of cash receipts and payments referred to in paragraph 2(b) are

advances made for, and the repayments of:
(a) Principal amounts relating to credit card customers;
(b) The purchase and sale of investments; and
(c) Other short-term borrowings, for example, those which have a maturity period
of three months or less.
3) Cash flows arising from each of the following activities of a financial enterprise
may be reported on a net basis:
(a) Cash receipts and payments for the acceptance and repayment of deposits with
a fixed maturity date;
31
(b) The placement of deposits with and withdrawal of deposits from other
financial enterprises; and
(c) Cash advances and loans made to customers and the repayment of those
advances and loans.
• Investments in Subsidiaries, Associates and Joint Ventures

When accounting for an investment in an associate or a subsidiary or a joint venture, an
investor restricts its reporting in the cash flow statement to the cash flows between itself
and the investee/joint venture, for example, cash flows relating to dividends and
advances. Acquisitions and Disposals of Subsidiaries and Other Business Units
The aggregate cash flows arising from acquisitions and from disposals of subsidiaries or
other business units should be presented separately and classified as investing activities.
An enterprise should disclose, in aggregate, in respect of both acquisition and disposal of

subsidiaries or other business units during the period each of the following:
(a) The total purchase or disposal consideration; and
(b) The portion of the purchase or disposal consideration discharged by means of
cash and cash equivalents.
The separate presentation of the cash flow effects of acquisitions and disposals of
subsidiaries and other business units as single line items helps to distinguish those cash
flows from other cash flows. The cash flow effects of disposals are not deducted from
those of acquisitions.
• Non-cash Transactions
Investing and financing transactions that do not require the use of cash or cash
equivalents should be excluded from a cash flow statement. Such transactions should be
disclosed elsewhere in the financial statements in a way that provides all the relevant
information about these investing and financing activities.
32
Many investing and financing activities do not have a direct impact on current cash flows
although they do affect the capital and asset structure of an enterprise. The exclusion of
non-cash transactions from the cash flow statement is consistent with the objective of a
cash flow statement as these items do not involve cash flows in the current period.
Examples of non-cash transactions are:
(a) The acquisition of assets by assuming directly related liabilities;
(b) The acquisition of an enterprise by means of issue of shares; and
(c) The conversion of debt to equity.
• Components of Cash and Cash Equivalents

An enterprise should disclose the components of cash and cash equivalents and should
present a reconciliation of the amounts in its cash flow statement with the equivalent
items reported in the balance sheet.
In view of the variety of cash management practices, an enterprise discloses the policy
which it adopts in determining the composition of cash and cash equivalents.
The effect of any change in the policy for determining components of cash and cash
equivalents is reported in accordance with Accounting Standard (AS) 5, Net Profit or
Loss for the Period, Prior Period Items and Changes in Accounting Policies.
• Other Disclosures
An enterprise should disclose, together with a commentary by management, the amount
of significant cash and cash equivalent balances held by the enterprise that are not
available for use by it.
There are various circumstances in which cash and cash equivalent balances held by an
enterprise are not available for use by it. Examples include cash and cash equivalent
balances held by a branch of the enterprise that operates in a country where exchange
33
controls or other legal restrictions apply as a result of which the balances are not
available for use by the enterprise.
Additional information may be relevant to users in understanding the financial position

and liquidity of an enterprise. Disclosure of this information, together with a commentary
by management, is encouraged and may include:
(a) The amount of undrawn borrowing facilities that may be available for future operating
activities and to settle capital commitments, indicating any restrictions on the use of these
facilities; and
(b) The aggregate amount of cash flows that represent increases in operating capacity
separately from those cash flows that are required to maintain operating capacity.
DATA ANALYSIS AND INTERPRETATION

SIVASHAKTHI BIO PLANTTEC LIMITED
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2003. (Rs in lakhs)
Amount (in Rs)

PARTICULARS
A. CASH FLOW FROM OPERATING ACTIVITIES

Net Profit (Loss)before tax and 6,823,578
Extra extraordinary items
Adjustments for:
Depreciation 11,046,171
Misc. Expenditure Written off 1,450
Profit on Sale of Fixed Assets
Other Income
Interest Received on FD (236,323)
Operating Profit (Loss) before working capital changes 17,634,876
Adjustments for:
Trade and other receivables (19,850,814)
Inventories 639,695
Trade Payables & Provisions 39,144,715

Cash generated from operations 37,568,472
Taxes Paid
34
CASH FLOW BEFORE EXTRAORDINARY ITEMS 37,568,472
Extraordinary items (Pro. Written back)
Net Cash From Operating Activities 37,568,472
B CASH FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (54,566,762)
Sale of Fixed Assets
Purchase Investment (5,000,000)
Other Income 236,323
Net cash used in investing activities (59,330,439)
Amount
PARTICULARS (in Rs)
Increase in Share Capital -
26,816,79
Proceeds from Long term barrowings 5
Repayment of finance/lease liabilities
9,500,00
Proceeds of Unsecured Loans 0
NET CASH USED IN FINANCING ACTIVITIES 36,316,794
Net increase in cash and cash equivalents 14,554,827

Cash and Cash equivalents as at 01-04-2002 17,344,694
(Closing balance)
35
Amount (in Rs)

PARTICULARS

Adjustments for:
Profit on Sale of Fixed Assets (156,195)
Other Income (138,959)
Adjustments for:
Trade and other receivables 5,368,905

Inventories (598,394)
Trade Payables 35,504,470
Cash generated from operations 66,295,465
Taxes Paid
CASH FLOW BEFORE EXTRAORDINARY ITEMS 66,295,465
36

Purchase Investment
Other Income 1,101,770
Amount (in Rs)

PARTICULARS
Proceeds from Long term barrowings
Repayment of finance/lease liabilities (5,112,701)
Repayment of Unsecured Loans -
NET CASH USED IN FINANCING ACTIVITIES (5,112,701)

(Closing balance)
37
Table IV.1.:-Cash Inflow For the Year 2003-04 (Rs in lakhs)
Particulars Amount (in Rs)
Operating profit 26,020,484
Trade & Other receivables 5,368,905
Other Income 1,101,770
Illustration IV.1:- Cash Inflow for the Year 2003-04
Interpretation:
38
During the year 2003-04 operating profit increased by Rs.26, 020,484/-, trade & other
receivables have decreased to Rs.5,368,905/-, and other income increased by
Rs.1,101,770/-.
Table IV.2.Cash Outflow For the Year 2003-04 (Rs in lakhs)

Inventories 598,394
Purchase of Fixed Assets 23,335,949
Long term borrowings 5,112,701
Illustration IV.2: Cash Outflow for the Year 2003-04
Interpretation:
39
During the year 2003-04 Purchase of fixed assets increased by Rs.23, 335,949/-,
Inventories have decreased to Rs.598, 394, trade payables increased by Rs.33, 127,250/-
and long term borrowings have decreased to Rs.5, 112,701/-.

Amount (in Rs)

PARTICULARS

Adjustments for:
Other Income (96,497)
Adjustments for:

Inventories (2,529,376)
Trade Payables (54,287,819)
Cash generated from operations (31,283,105)
Taxes Paid (153,173)
CASH FLOW BEFORE EXTRAORDINARY ITEMS (31,436,278)
40
Net Cash From Operating Activities (31,436,278)

Purchase Investment (58,580)
Amount (in Rs)

PARTICULARS
Increase in Share Capital 25,000,000
Proceeds from Long term barrowings
Repayment of Unsecured Loans (7,000,000)
NET CASH USED IN FINANCING ACTIVITIES 478,245
Net increase in cash and cash equivalents (37,970,749)

(Closing balance)
41
Table IV.3:Cash Inflow For the Year 2004-05 (Rs in lakhs)
Operating Profit 24,288,581
share capital 25,000,000
Illustration IV.3: Cash Inflow for the Year 2004-05
Interpretation:
42
During the year 2004-05 operating profit have decreased to Rs.24, 288,581, Trade &
Other receivables have decreased to Rs.1,245,509/- and Other Income have decreased to
Rs.630,412/- Share capital increased by Rs.25, 000,000/-.
Table IV.4:Cash Outflow For the Year 2004-05 (Rs inlakhs)

Inventories 2,529,376
purchase of fixed assets 7,584,548
purchase of investments 58,580
Repayment of Finance 17,521,755
Repayment of Unsecured loans 7,000,000
43
Interpretation:
During the year 2004-05 cash outflows of Inventories increased by Rs.2,529,376/-, and
Trade Payables have decrease to Rs.50,678,440/-, purchase of Fixed assets have decrease
to Rs.7,584,548/-, purchase of investments increased by 58,580, repayment of finance
increased by Rs.17,521,755/-, and repayment of Unsecured Loans increased by
Rs.7,000,000/-.
44
Amount (in Rs)

PARTICULARS

Adjustments for:
Profit on Sale of Fixed Assets 1,798,976
Adjustments for:

Trade Payables & Provisions (7,093,419)


Sale of Fixed Assets 7,318,835
Investment in Subsidiaries (23,000,000)
Profit on Sale of Investments & Other Income 723,352
45
Amount (in Rs)
PARTICULARS
57,300,0
Increase in Share Capital 00
Proceeds from Long term barrowings 22,048,597
(17,560,1
Repayment of finance/lease liabilities 44)

(Closing balance)
Table IV.5: Cash Inflow For the Year 2005-06 (Rs in lakhs)
46
Amount
Particulars (in Rs)
Operating profit 45,329,042
Trade & Other Receivables 39,862,080
Profit on sale of investments & Other Income 723,352
Share Capital 57,300,000
Secured loans 22,048,597
Interpretation:
During the year 2005-06 operating profit increased by Rs.45,329,042/-, Trade & other
receivables Increased by Rs.39,862,080/- and sale of fixed assets increased to Rs.
7,318,835/-, share capital Increase to Rs.5,70,00,000/-, and long term borrowings
increase by Rs.22,048,597/- and profit on sale of investments & Other Income increased
by Rs.723,352/-.
Table IV.6:Cash Outflow For the Year 2005-06 (Rs in lakhs)
47
Purchase of Fixed assets 31,260,897
Investment on subsidiaries 23,000,000
Repayment of Liabilities 17,560,144
Interpretation:
During the year 2005-06 Inventories Increased by Rs. 6,763,000/-, Trade Payables have
decrease to Rs.7,093,419/-, purchase of fixed assets increased by 31,260,897/-,
Investment in Subsidiaries (Navabarat Fertilizers Limited) is Rs.23,000,000 and
Repayment of loans increased by 17,560,144 /-.
SIVASHAKTHI BIO PLANTTE LIMITED

48
Amount (in Rs)
PARTICULARS
Adjustments for:
Profit on Sale of Investment (7,625,356)
Interest Received (346,360)
Other income (42,000)
Adjustments for:

Trade Payables & Provisions (2,125,289)


Investment in Subsidiaries (80,000,000)
Profit on Sale of Investments & Other Income 8,013,716
49
Amount (in Rs)
PARTICULARS
Increase in Share Capital 69,293,720
Proceeds from Long term barrowings 71,883,646
Net increase in cash and cash equivalents (27,861,369)

(Closing balance)
50
Table IV.7: Cash Inflow for the Year 2006-07 (Rs in lakhs)
operating profit 80,755,936
profit on sale of investments& other income 8,013,716
Share Capital 69,293,720
Long term borrowings 71,883,646
Interpretation:
During the year 2006-07 Operating Profit increased by Rs.80,755,936/-, Sale of Fixed
assets increased by Rs.13,029,407 /-, Profit on Sale of Investments increased by
Rs.8,013,716/-, Share Capital Increased by Rs.69,293,720/- , working Capital loans
increased by 71,883,646/- and Trade receivables have increased to Rs.60,665,419/,
51
Table IV.8: Cash Outflow For the year 2006-07 (Rs in lakhs)
Trade payables & provisions 2,125,289
Purchase of fixed assets 79,567,583
Investments in Subsidiaries 80,000,000
Repayment of Finance 1,846,518
Illustration IV.8: Cash Outflow For the year 2006-07
Interpretation:
During the year 2006-07 Inventories increased by Rs.46,632,986/, Trade payables &
provisions have decreased to Rs.2,125,289/-,Purchase of fixed assets increased by
Rs.79,567,583/,Investments in subsidiaries increased by (Navabarat Fertilizers Limited)
Rs 80,000,000/-, and Repayment of Finance have decreased to Rs.1, 846,518/-
52
Amount
PARTICULARS (in Rs)
Adjustments for:
1,45
Misc. Expenditure Written off 0
Profit on Sale of Fixed Assets -
Profit on Sale of Investment -
Interest Received -
(4,632,
Other income ,005)
Adjustments for:

(47,179,55
Inventories 2)
74,458,827
CASH FLOW BEFORE EXTRAORDINARY ITEMS -

B .CASH FROM INVESTING ACTIVITIES

(68,052,94
Purchase of Fixed Assets 7)
Investment in Subsidiaries -
Profit on Sale of Investments & Other Income 4,632,005
Net cash used in investing activities 23,157,573
53
Amount (in Rs)
PARTICULARS
Increased in Bank barrowings 2,379,276
Loan from Directors (16,800,000)

(Closing balance)
54
Table IV.9: Cash Inflow for the year 2007-08 (Rs in lakhs)
operating profit 90,338,501
Profit on sale of investments& other income 4,632,005
Bank borrowings 2,379,276
Illustration IV.9: Cash Inflow for the year 2007-08
Interpretation:
During the year 2007-08 Operating Profit increased by Rs. 90,338,501/-, Trade receivables
& other receivables have decreased to Rs.29, 788,823/-, Sale of Fixed assets have
decreased to Rs. 12,119,688/-, Profit on Sale of Investments have decreased to Rs.
4,632,005/-, Bank borrowings have decreased to Rs.2,379,276/-.
55
Table IV.10: Cash Outflow For the year 2007-08 (Rs lakhs)
Trade payables & provisions 1,511,055
Purchase of fixed assets 68,052,947
Illustration IV.10: Cash Outflow For the year 2007-08
Interpretation:
During the year 2007-08 Cash outflows are Inventories Increased by Rs. 47,179,552 /-,
Trade payables & provisions have decreased to Rs.1, 511,055/- and Purchase of fixed
assets have decreased to Rs. 68,052,947 /,
V.1.FINDINGS
56
 Major cash inflows of the company during 2004-08 are operating profit, trade &
other receivables and other income.
 Major cash outflows of the company during 2004-08 are purchase of fixed assets
and investments in subsidiaries (Navabarat Fertilizers Limited).
 The company has negative cash flows from investing activities through purchase
of fixed assets, investments from 2004-2008.
 Through increase in share capital & working capital loans, the company owns the
results for financial activities.
 The growth in operating profit from 2005-2008 gives positive results for the
company
 The company has increased its share capital from 2005-2007 from 25,000,000-
69,293,720.
 The operating activities from 2004-2008 shows positive cash flows for the
organization.
 The company has increased its sale of fixed assets from 2006-2008 from
7,318,835-12,119,688.
 The company is having credit limit with Banks.
57
V.2.CONCLUSIONS
 Major cash outflows are related to operating profit, purchase of fixed assets share
capital, inventories, long term borrowings and investment in subsidiaries trade &
other receivables which are in satisfactory level.
 Sivashakthi need to focus on improving the trade payables, purchase of

investments, and sale of fixed assets. To improve this Sivashakthi has to control
the following activities.
• Losses on sale of fixed assets
• Lack of bank borrowings
• Average trade payables
 The overall cash out flows of the Sivashakthi is in satisfactory level.
V.3.SUGGESTIONS
58
 The company can take term loans from banks to acquire fixed assets and to
expand the business.
 The credit limit with banks should be increased to expand the operations of the
company.
 The company has to increase its cash flow from operating activities instead of
increasing in share capital.
 It is necessary to mobilize the funds in investing activities.
 The management of the company has to prepare the cash statements for predicting
the future.
 The company can take working capital loans from banks.
 The company has to prepare strategy for expanding the operations.
 The company can increase its capital revenue by increasing its sale of fixed assets
59
BIBLIOGRAPHY
1. TEXT BOOKS
 Financial Management, Prasanna Chandra, 5/e, Tata McGraw-hill Publication

 Financial Management, I.M.Pandey, 8/e, Himalaya Publications.
 Financial Management, M.Y.Kahn & P.K.Jain, 3/e, Tata McGraw-hill Publication
Company.
 Financial Management, R.K.Sharma Shasi Guptha, 1/e, Kalyani publications.

 Financial Management, Dr.S.N.Maheshwari,7/e, Principals and practice Sultan
chand and sons.
 Financial Accounting, Horngreen, 8/e, Pearson education.
 Financial Accounting Reporting & Analysis, Stice & Stice 1/e, Thomas
Publishers.
 Financial Accounting Management, Ambrish Guptha, 1/e, Pearson education.
2. WEBSITES
 www.sivashakthi.com
 www.sbinfocanada.about.com
 www.investorwords.com
60

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INTRODUCTION TO TOPIC

I.2 OBJECTIVES OF THE STUDY:

 To analyze cash flow statements of Sivashakthi Bio-Planttec limited from 2003 to

 To know the cash flow in operating, investing and financing activities.

I.3. IMPORTANCE OF THE STUDY:

 Helpful in short term financial decisions:

 Useful in capital budgeting:

 Useful as a control device:

I.5. SCOPE OF THE STUDY:

I.6. RESEARCH METHODOLOGY

I.7. LIMITATIONS OF THE STUDY:

 The data source is mainly based on annual reports only.

 Non-Cash Transactions are ignored in cash flow analysis

II.1.An Overview of Sivashakthi Bio-Planttech Ltd.

II.2. History of the organization

1. Teak Saplings - 25 Lakhs /annual

- Liquid Form - 10 Lakhs Kl/annual

• They have straight main stump

The Company has 4 Production Centers at Sangaluru, Lucknow, Indore, Bhubaneswar

II.4. PRODUCTION PROCESS

FOR TEAK SEEDING:

Special features of Sivashakthi’s Teak Seeding

Sivashakthi’s Teak plants have the following special characters.

Sivashakthi’s special package to the customers:

2) Free technical service is provided to the customers through a team of well

5) Service on call: - Whenever the customers require company’s technical

6) ISO 9001-2000 CERTIFICATION

FIVE CORE VALUES:

SIVASHAKTHI has always sought to be a value driven organization. These values

This heritage is being continuously enriched by formalization of high standards of

 To achieve a minimum turnover of Rs. 5 billion by the year 2009

THEIR APPROACH TO GROWTH

INNOVATION & CREATIVITY:

RESEARCH AND DEVELOPMENT

The heart of SIVASHAKTHI’S research and development is their product pipeline.

ALL INNER COMPANIES

• Sivashakthi Bio Partech Ltd.( SSBPL)

• Victor Fertilizers Limited(VFL)

• Victor Agri Industries Limited (VAIL)

• Victor Agri Agencies Private Limited(VAAPL)

• Victor Technologies Limited(VAL)

• Nava-Barat Fertilizers Limited(NBFL)

• Victor Homes Limited(VHL)

MANAGING DIRECTOR CHAIR PERSON

CONCEPT OF CASH FLOW STATEMENT

Format of the Cash Flow Statement

BENEFITS OF THE CASH FLOW

1. How companies are able to finance large-scale expansion or modernization, or

III.2. PREPARATION AND PRESENTATION OF CASH FLOW STATEMENT

• Cash comprises cash on hand and demand deposits with banks.

Cash and Cash equivalents:

III.3.PRESENTATION OF A CASH FLOW STATEMENT

Examples of cash flows arising from financing activities are:

long-term borrowings; and

(c) Cash repayments of amounts borrowed.

III.4. REPORTING OF CASH FLOWS

a) Reporting Cash Flows from Operating Activities

(a) From the accounting records of the enterprise.

• Interest and Dividends

Reporting Cash Flows on a Net Basis

2) Examples of cash receipts and payments referred to in paragraph 1(a) are:

Examples of cash receipts and payments referred to in paragraph 2(b) are

• Investments in Subsidiaries, Associates and Joint Ventures