A

STUDY
ON
CASH FLOW STATEMENT
AT
DR REDDYS LABORATORIES
A Project report submitted to Osmania University
In partial fulfillment for the Award of the Degree of
MASTER OF BUSINESS ADMINISTRATION

Submitted by
P. MANOJ KUMAR
HT NO: 2121-20-672-049
UNDER THE GUIDANCE OF
---------------------------------------
Assistant Professor
ARISTOTLE PG COLLEGE
(Affiliated To Osmania University, Hyderabad)
Recognized By UGC under section 2(f) of UGC Act 1956
Beside Moinabad Police Station,
Chilkur, Moinabad ,Ranga Reddy District, Telangana.
(2020-2022)
 CHAPTER-I
INTRODUCTION
The cash flow statement (CFS) measures how well a company manages its cash position,
meaning how well the company generates cash to pay its debt obligations and fund
its operating expenses. The cash flow statement complements the balance sheet and income
statement and is a mandatory part of a company's financial reports since 1987. In this article,
we'll show you how the CFS is structured, and how you can use it when analyzing a
company.
The CFS allows investors to understand how a company's operations are running, where its
money is coming from, and how money is being spent. The CFS is important since it
helps investors determine whether a company is on a solid financial footing.

Creditors, on the other hand, can use the CFS to determine how much cash is available
(referred to as liquidity) for the company to fund its operating expenses and pay its debts.

The Structure of the Cash Flow Statement

The main components of the cash flow statement are:

1. Cash from operating activities

2. Cash from investing activities
3. Cash from financing activities
4. Disclosure of noncash activities is sometimes included when prepared under
the generally accepted accounting principles (GAAP).2

It's important to note that the CFS is distinct from the income statement and balance sheet
because it does not include the amount of future incoming and outgoing cash that has been
recorded on credit. Therefore, cash is not the same as net income, which on the income
statement and balance sheet includes cash sales and sales made on credit.

Cash From Operating Activities

The operating activities on the CFS include any sources and uses of cash from business
activities. In other words, it reflects how much cash is generated from a company's products
or services.
In the case of a trading portfolio or an investment company, receipts from the sale of loans,
debt, or equity instruments are also included. When preparing a cash flow statement under
the indirect method, depreciation, amortization, deferred tax, gains or losses associated with a
noncurrent asset, and dividends or revenue received from certain investing activities are also
included. However, purchases or sales of long-term assets are not included in operating
activities.

Cash flow is calculated by making certain adjustments to net income by adding or subtracting
differences in revenue, expenses, and credit transactions (appearing on the balance sheet and
income statement) resulting from transactions that occur from one period to the next. These
adjustments are made because non-cash items are calculated into net income (income
statement) and total assets and liabilities (balance sheet). So because not all transactions
involve actual cash items, many items have to be re-evaluated when calculating cash flow
from operations.

As a result, there are two methods of calculating cash flow: the direct method and the indirect
method.

Direct Cash Flow Method

The direct method adds up all the various types of cash payments and receipts, including cash
paid to suppliers, cash receipts from customers, and cash paid out in salaries. These figures
are calculated by using the beginning and ending balances of a variety of business accounts
and examining the net decrease or increase in the accounts.

Indirect Cash Flow Method

With the indirect method, cash flow from operating activities is calculated by first taking the
net income off of a company's income statement. Because a company’s income statement is
prepared on an accrual basis, revenue is only recognized when it is earned and not when it is
received.

Net income is not an accurate representation of net cash flow from operating activities, so it
becomes necessary to adjust earnings before interest and taxes (EBIT) for items that affect
net income, even though no actual cash has yet been received or paid against them. The
indirect method also makes adjustments to add back non-operating activities that do not
affect a company's operating cash flow.
For example, depreciation is not really a cash expense; it is an amount that is deducted from
the total value of an asset that has previously been accounted for. That is why it is added back
into net earnings for calculating cash flow.

In financial accounting, a cash flow statement, also known as statement of cash flows or
funds flow statement, is a financial statement that shows how changes in balance sheet
accounts and income affect cash and cash equivalents, and breaks the analysis down to
operating, investing, and financing activities. Essentially, the cash flow statement is
concerned with the flow of cash in and cash out of the business. The statement captures
both the current operating results and the accompanying changes in the balance sheet As
an analytical tool, the statement of cash flows is useful in determining the short-term
viability of a company, particularly its ability to pay bills. International Accounting
Standard 7 (IAS 7) is the International Accounting Standard that deals with cash flow
statements.
People and groups interested in cash flow statements include:
 Accounting personnel, who need to know whether the organization will be able to cover
payroll and other immediate expenses
 Potential lenders or creditors, who want a clear picture of a company's ability to repay
 Potential investors, who need to judge whether the company is financially sound
 Potential employees or contractors, who need to know whether the company will be able
to afford compensation
 Shareholders of the business.
 CHAPTER-II
REVIEW OF LITERATURE
GĂBAN LUCIAN-2016- Financial reporting system includes three main pillars, namely
balance sheet, income statement and cash flow. If the balance sheet reflects
shareholders’ wealth at a given time, income statement demonstrates the efficiency or
inefficiency of the activity and cash flows measures the company’s viability. This is the
reason for which I have approached the cash flow matter in this paper, reviewing the latest
studies and studying in detail the evolution of cash flow ratios on small and medium
enterprises in Romania for a period between 2006 and 2014, highlighting the
effects of the financial crisis on these enterprises.

Olga Davis-2016- Business analysts report that poor cash management is the main cause
of business failure. Poor cash management is one of the most common stumbling
blocks for any business. This challenge applies to every business throughout the
world. This research shows that many development initiatives have to be undertaken
in Estonia in the future. The importance of the cash flow statement lies in the fact that
it clarifies changes in liquidity and provides insight into the company’s operating,
investing and financing activities. In addition, the cash flow statement reveals the
company’s ability to generate cash to meet its short-term obligations, thereby
clarifying the company’s liquidity and solvency position. An understanding of effective
cash flow statement and it management is a vital tool to ensure the long-term prosperity of
any company. It is also a key factor in the planning and successful execution of all aspects
of operations. In this master’s thesis the author identifies the difficulties that can
arise in connection with the preparation and analysis of the cash flow statement in
Estonia. In addition, the author shows that there is a need for increased guidance and more
readily accessible training materials for Estonian businesses. This research draws upon
data taken from a survey of accountants, managers and students within Estonia. The
data reveals that, due to the lack of robust accounting programs and accessible literature
on international accounting and reporting, Estonian accountants are insufficiently
competitive on the international market. Furthermore, Estonian financial reporting is
weak in comparison with other EU countries. This, in turn, reflects that most business
directors and managers did not change their organization’s financial reporting paradigm
from one where financial reporting is delegated to chief accountants to another
where directors are obligated to ensure the true and fair preparation of financial
statements and the company’s financial management.

Aclan OMAG-2016- The statement of cash flows is among the key financial
statements which companies should prepare according to the Generally Accepted
Accounting Principles. In Turkey, the uniform accounting system accepts the cash
flow statement as a supplementary financial report. On the other hand, publicly traded
companies preferthe Turkish Accounting Standards in preparing their cash flow
statements. Cash flows from financing activities form one of the major parts of this
statement as the financial strategies of companies. The aim of this study is to
analyze the cash flows from the financing activities of a sample company from
2011 to 2014 in the Turkish Automotive Industry and to show its related strategy.
The company’s financing activities involve cash inflows and cash outflows as it is
normally observed in the literature. In addition, the share of bank loans and
dividends demonstrate the significance of debt and dividend policy with regard to
financing activities.
Aymen Telmoudi-2016- In this article, we studied the problem of the determination
of operating cash flows. On the basis of a sample representative of the Tunisian
commercial companies, we determined the explanatory power of the operating cycle
components on the behaviour of the operating cash-flows. The results of this study
prove that our dependent variable, operating cash-flow, is significantly given by the
means of four factors dependent on the operating cycle: the timely debt collection, the
timely debt payment, the timely flow of stock and the gross commercial margin. However,
our dependent variable varies independently of two factors: Earnings and Variation of
turnover.

Mangayarkkarasi Muthuvelan-2015- Cash flow analysis is highly useful for financial

planning in the firm. This analysis is used to determine what transactions caused the cash
balance to change during a particular period. Many users give preference to direct method
few only considering the indirect method. Here, two statements are to be prepared one is
calculation of cash from operations and another one is cash flow statement. In this work
the basic tool used to understand the cash flow analysis of previous consecutive five year’s
data collected from M/s. Pantaloon Retail (India) Limited. The company involves retail
operations in Fabric Materials, Food Materials, Electronic Goods, Home Needs and
Logistics. But all these operations are focused on retail markets in India. The cash from
business operations increases gradually from the year 2006-2010. Here, the sources and
applications of cash for the year 2010 is increased compared to other years. So the
financial position of the firm is good at the year 2010.
AKSU AROLA-2015- Despite the accounting profession seems to be advocating
accrual accounting, international research often suggests that the cash flow statement
is the financial statement section most in unison with the objectives of financial
statements given by international accounting standard-setters in that 1) it is
incrementally useful, over and above the balance sheet and the income statement, in
predicting an entity’s future cash flows and in assessing an entity’s liquidity and
solvency, and 2) the information on the cash flow statement is more relevant,
reliable and comparable than the information on the accrual-based financial
statement sections. Therefore, compared to the other sections, the cash flow
statement should better help users assess the net present value of an entity or an
investment, which, drawing from modern financing theory, is exactly what they
look for from a set of financial statements. However, this study argues that there are
problem areas in the cash flow statement production that diminish the usefulness to users.
 CHAPTER-III
RESEARCH METHODOLOGY
NEED AND IMPORTENCE OF STUDY

Many business owners disregard the importance of cash flow statements because they
unwittingly believe that their current financial standing can be construed from other
financial reports and projections. Unfortunately, however, a cash flow statement is
necessary to adequately assess the incoming and outgoing flow of cash and other resources
in a business.
Not only will a business owner with a cash flow system be more aware of his or her
financial standing, but it will also help investors to make educated decisions on future
investments. A business with regular and reliable cash flow statements shows more
economic solvency, and is more attractive to investors.
A cash flow statement documents the incoming and outgoing cash in plain terms. Future
sales and sales made for credit (unless they have been paid off) are not included in the
cash flow statement, and most of the data will come from core operations. Payables and
receivables should be expressly defined, as should depreciation of product value and
inventory that has not yet been moved.
This will allow a business owner to compare past periods with the current financial
standing and determine whether your receivables have increased or decreased.
This can also help to track your investments next to your receivables and payables. Are
your investments increasing or decreasing in value? And has your inventory moved at a
steady pace? New or expanding businesses can expect to see a decrease in cash flow, but
this doesn’t mean that the business is going under. More stables businesses should see a
steadily increase in cash flow over a period of several months or years.
There are typically five different sections in a cash flow statement, though large
businesses might have more complex cash flow systems as required.
 SCOPE OF THE STUDY:

Since it will not be possible to conduct a micro level study of all service industries in
Andhra Pradesh, the study is restricted to Dr. Reddy's laboratories only.
A study that involves an examination of long term as well as short term sources that a
company taps in order to meet its requirements of finance.
The scope of the study is confined to the sources that Dr. Reddy's laboratories tapped
over the years under study i.e. 2017-2021.

OBJECTIVES OF THE STUDY:

 To know the flow of cash in the organization Dr. Reddy's laboratories.

 To access the efficiency with sources and uses of cash were made by the co ordinance the
present year 2017-2021.
 To identify the changes in the elements of focus and uses of working capital in between
above mentioned years.
 To improve the financial performance of the company
 RESEARCH METHODOLOGY
The following are the main sources of date used for this study which are Collected and
compiled from published and unpublished sources of the Company data. The published
sources are as follows.

DATA COLLECTION:

Management information system published by Dr. Reddy's laboratories.

 Status Report on Dr. Reddy's laboratories.
 Journals, books and other published reports.

The present study is mainly based on primary and secondary sources of Data collection.
The primary data was directly collected by observations, Interviews questionnaire etc.
The secondary data was collected from the literate available in libraries and research
studies and annual reports are related to the present study. It includes published and
unpublished literature like books, reports and generally Articles of the Dr. Reddy's
laboratories.
LIMITATIONS OF THE STUDY:
The limitations of present study are as follows:

 The study cover a period of FIVE years from 2017-2021.

 The study does not flow the fund.
 The study is based mainly on secondary information.
 The study does not touch all the units of Dr. Reddy's laboratories.
 The present study cannot be used for inter firm comparison.
 Limited span of time is a major limitation for this project.
 The act and figures of the study is limited to the period of FIVE years i.e. 2017-2021.
 The data used in reports are taken from the annual reports, published at the end of the
years.
 The result does not reflect the day-to-day transactions.
 It is also impossible to the study of day-to-day transactions in cash management.
 The analysis of the working capital is taken FIVE years.
 CHAPTER-IV
INDUSTRY PROFILE
Pharmaceutical Industry:
The pharmaceutical industry is one of the largest and the most exciting sectors to be
working today. It is a rapidly changing environment where many advances have taken
place over the past 20 years. Furthermore, it will continue to develop and evolve at an
ever-increasing pace over the next decade. New drugs, new technologies and exciting new
discoveries have driven this evolution. Pharmaceuticals are the medicinally effective
chemicals which are converted to dosage forms suitable for patients to imbibe. In its basic
chemical form, pharmaceuticals are called bulk drugs or active pharmaceutical ingredients
(APIs) and the final dosage forms are known as formulations.
Active pharmaceutical ingredients or bulk drugs are derived from four types of
intermediates (raw materials), namely.
 Plant derivatives (herbal products)

 Animal derivatives e.g. insulin extracted from Bovine Pancreas

 Synthetic chemicals

 Biogenetic (human) derivatives e.g. human invectives

Classification of pharmaceuticals
nd
The Registration Regulation which ran into force on March 2 , 1996 suggests the
classification of pharmaceuticals as prescription or non-prescription on their stage of
registration or registration renewal. Almost all of the pharmaceuticals which are supplied
to healthcare services are in the extent of prescription pharmaceuticals. But in practice,
nearly all of the pharmaceuticals except narcotics and psychographs may be purchased
without prescriptions from pharmacies.
The ministry of Health, in the context of its studies on harmonization to EU
th
pharmaceuticals regulations with a regulation published on April 27 , 1996 permitted the
public advertisement of non-prescription pharmaceuticals. But, on the trial opened by the
application of Turkish Union of Pharmacists, the Council of State took the decision of
stopping the execution. For this reason, no further development could be recorded later
th
than the regulation published on April 27 , 1996 on the legislation related with
pharmaceuticals.

nd
Basing on the Registration Regulation which ran into force on March 2 , 1996 the
Ministry of Health turned the license status of many pharmaceuticals applied for
registration and many pharmaceuticals in the same category existing on the market to the
status on non-prescription pharmaceuticals.
Due to some practices in basic applications like promotion, pricing, registration,
packaging information on prescription and non-prescription pharmaceuticals, a quite
different appearance than the EU centuries to which we are targeting to harmonies came
out.
It must be paid attending that, as in all European counties, the application of “non-
prescription pharmaceuticals” is formed of the following conditions and the arrangement
should be made synchronously.
COMPANY PROFILE
Dr. Reddy’s Laboratories

The company was incorporated by Dr. Anji Reddy in 1984. Over the years DRL
(Dr. Reddy‟s Lab) has successfully transformed itself from a reverse engineering and bulk
drug company to a research driven, formulation based pharmaceutical company. The
company has a major presence in anti-infective, gastro-intentional, pain management and
cardiovascular therapeutic segment. Currently six of its brands are among the top 300-
pharma brands in the country. DRL is among the fastest growing companies in the
domestic formulations market and is set to emerge as the third largest pharmaceutical
company behind Glaxo and Ranbaxy after its merger with Cheminor Drugs and American
Remedies.

DRL has transformed itself from process engineering and research driven
pharmaceutical company in the past 6 years. The company achieved several landmarks in
2001 with its ADR issues, launch of generic Fluxetine in the US and licenser of anti
diabetic molecule to Novarties.

Currently DRL manufactures over 100 bulk actives and serval key intermediates at their
six bulk actives facilities, all of which are c GMP – complaint and USFDA inspected.

All the activities are carried out in-house, supported by the indigenous strengths in
analysis, testing, organic synthesis, process development and a controlled supply chain.

It constantly strives to innovate and develop technological and commercial skills to

build capabilities for specially products. DRL‟s customer-focused marketing and support
strategies gave an access to a wide and versatile range of products, combined with the
advantage of fast and responsive single-point interaction.
 Mission Statement

Dr Reddy‟s foundation believes in the interest motivation and capacity of the

human being for progress, given the right environment.

Vision

To become a discovery-led global pharmaceutical company.

Values

DRL is a value driven organization with a strong focus on the following elements:

 Quality: DRL is dedicated to achieve the highest level of quality in everything itdoes to
delight its customers.

 Innovation & continuous learning: The Company provides an environment ofinnovation

and learning that fosters, in every employee, a desire to excel and willingness to
experiment.

 Truth & Integrity: Its business practices are guided by the highest ethicalstandards of
truth, integrity and transparency.

 Respect for the Individuals: DRL tries to bring out the best in individuals byvaluing
diversity and nurturing team sprit, individual development and self-esteem.
 CHAPTERIZATION
CHAPTER-1
INTRODUCTION
CHAPTER-2
REVIEW OF LITERATURE
CHAPTER-3
RESEARCH METHODOLOGY
 NEED OF THE STUDY
 OBJECTIVES OF THE STUDY
 SCOPE OF THE STUDY
 DATA COLLECTION
 LIMITATIONS
 STATISTICAL TOOLS
CHAPTER-4
INDUSTRY/COMPANY PROFILE
CHAPTER-5
DATA ANALYSIS
CHAPTER-6
FINDINGS
CHAPTER-7
SUGGESTION & CONCLUSION
BIBLIOGRAPHY
ANNEXURES