ACKNOWLEDGEMENT

I would like to express my teacher Mr.ANISH KURIAN as well as our

principal Mr.RAJESH RISHIMANGALAM , who gave me the golden
opportunity to do this wonderful project ‘which also helped me in
doing a lot of research and I came to known about so many new thing ,
I am really thankful to them .

Secondly, I would also like to thank my parents and friends who helped
me a lot to finalize this project within the limited time frame .

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 CONTENTS

01. Introduction 3
02. Needs and objectives 4
03. Hypothesis 5
04. Research question 6
05. Cash flow statement 7
06. Methods of preparing cash flow statement 8
07. Cash flow from operating activity 10
08. Cash flow from investing activity 12
09. Cash flow from financing activity 14
10. Format of indirect method 15
11. Example of cash flow statement of Tata motors 18
12. Analysis 19
13. Conclusion 20
14. Bibliography 21

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 INTRODUCTION

Simply ,cash flow statement indicates the amount of cash receipts and
the amount of cash receipts and the amount of cash payment /
detriments [from] during where cash was generated and to where it
was expected . In other word ,it reports the cash inflows and outflows
during a time period.
The cash flow statement shows the net increase / decrease in cash and
explains the causes for the changes in the cash balance ,during a
certain time period . The major business activities that results in either
net cash inflow / net cash and cash outflow are operating ,financing and
investing activities.
“ cash flow statement prepared to indicate the increase in the cash
resources and the utilization of such resources of a business during the
period .
I have to chosen this topic for my project work for learning more about
the cash flow statement.

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 NEEDS AND OBJECTIVES

The primary objective of cash flow statement is to supply is to supply

the necessary information relating to generation of cash to the future /
prospective cash can be represented with the help of this statement .
A. Measurement of cash
Inflows of cash and outflows of cash can be measured annually
which arise from operating activities and financial activities .
B. Generating inflow of cash
Timings and certainly of generating the inflows of cash can be
known which is directly helps the management to take financing
decision in future .
C. Classification of activities
All the activities are classified into operating , investing and
financial activities which help a firm to analyse and interpret its various
inflows and outflows of cash .
D. Prediction of future
A cash flow statement ,no doubt,forecasts the future cash flow .

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 HYPOTHESIES
The core / making cash flow assumption is determining the appropriate
values for each assumption and deciding when the change in value star
and when the next one begins .These are some of the assumptions that
most of us need to make at one time /another .
Cash in
A. Funds from loan / other sources . The interest rates and the dollar
amount of the loan accepted.
Cash out
B. The payments you make on loans .Amortized tables with the interest
percentage rates and timing apply .
C. The usefully of a budget increases dramatically when timing
considered . If your pricing ,material handling and labour costs do not
include seasonality ,401(k) benefits thresholds , and holding pay when
appropriate ,then your cash flow won’t reflect the true fluctuation of
funds available to your organization .

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 RESEARCH QUESTIONS

1.Why is specific disclosure of cash flow from financing activities

important while preparing cash flow statement ?
2. Why is separate disclosure of cash flow investing activities important
while preparing cash flow statement ?
3. Dividend paid by financial company is classified under which
preparing cash flow statement ?
4. Why cash flow statement used ? reason?
5.What are the effects in the cash flow statement of asset and liability ?

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Cash flow statement

> Provides information about cash inflows and outflows during an

accounting period .
> focuses on cash .
> three section to the statement of cash flows :
1. Cash flow from operating activities
2. Cash flow from investing activities
3. Cash flow from financing activities

Statement of cash flow

>while developing cash flow statement we need information from

balance sheet and income statement.
>All items are classified as either cash inflows or cash outflows.
If an item represents a cash INFLOW
----> You ADD that item .
If an item represents a cash OUTFLOWS
---->You SUBRACT that item.

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 Statement of cash flow

> Remember: cash is on the left hand side of the balance sheet
> Assets = Liabilities + Equity
> Most classifications(IN\OUTFLOW) are easy
An increase in gross fixed assets An increase of long-term debt .

Cash inflow =decrease in assets or increase in liability or equity.

Cash outflows =increase in assets or decrease in liabilities or equity.

Methods of preparing cash flow statement

There are two methods by which we can prepare cash flow statement.
> Direct Method
> Indirect Method

Direct Method :

> very simple and result is more easily understood

>In this method you are analyzing or evaluating your cash and bank
accounts to identify cash flow during the period .

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Indirect Method :
> frequently used and most common method .
> less expensive to use.
> in this method you start with net income per the income statement ,
reverse out entries to income and expense accounts that do not
involve a cash movement.

Indirect vs direct
> the main difference between the direct and indirect method
And the indirect method is involvement of the cash flows from
operating activities.
> under the direct method,the cash flows from operating activities will
include the amounts for lines such as cash from customers and cash
paid to suppliers .
> in contract ,the indirect method will show net income followed by the
adjustments needed to convert the total net income to the cash
amount from operating activities .

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 Cash flow from operating activities

Start with the net profit (income) and “modify” until you get the net
cash flow

Net income from income statement(starting point )

+ Depreciation
Changes in current Assets ( Accounts
receivable,inventories )
Changes in current liability (Accounts payable , Accruals )
= Net cash flow from operating Activities

As Depreciation is non cash expense and we had subtracted it will add it

back in cash flow statement.

Example
Net profit 50000
ADD
Depreciation 8000
Decrease in A/c receivables 5000
LESS (2000)

Loss on sale of asset (1000)

Cash flow from operations 60000

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Operating cash flow includes:
> receipts from the sale of goods or services
> receipts for the sale of loans ,debt or equity
Instruments in a trading portfolio
> interest received on loans
> buying Merchandise
>items which are added back to [ or subtracted from ,as appropriate ]
the net income are :
> depreciation (loss of tangible asset value over time
> Deferred tax
> Amortization (loss of intangible asset value over time)
> Any gains or losses associated with the sale of a noncurrent asset ,
because associated cash flows do not belong in the operating section .
>dividends received
> revenue received from certain investing activities

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 Cash flow investing activities
Buying or selling productive long lived assets such as plants and
equipment

Zero (starting point)

Changes in Gross fixed assets
= Net cash flow investing activities

Example

Cash flow from operations 60000

Cash flow from investing activities

Cash from sale of Mkt.securities 5000

Cash advanced to borrowed (8000)
Cash advanced to borrowed 13000
Cash advanced to borrowed 70000

Investing activities include:

> purchase or sale of an asset ( asses can be land,etc…)
> loans made to suppliers or received from customers

> while preparing cash flow from investing activities we are looking for
changes in gross fixed assets ,net fixed assets

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 > what if gross fixed assets are not reported in balance sheet ?
Then we will first calculate Dep .then find out gross fixed Assets

Depreciation (on the income statement)=

Change in accumulated depreciation (on the balance sheet )
Change in gross fixed assets =
change in net fixed assets +depreciation (on the income statement)

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 Cash flow financing activities

> financing activities

This includes transactions related :
New loans (long term ,short term debt)/repayment of principal scale
(issue) or repurchase of stock and payment of dividends .
Zero (starting point)
Changes in notes payable,current portion of LT debt,long
term debt,common stock
- Dividends payout (= net income - change in retained
earnings)
= Net cash flow from financing activities

Example
Cash flows from investing 70000
activities
Cash flow from financing 70000
activities
Proceeds from sale of shares 8000
Dividend paid (1000)
Cash proceeds from n/p 12000
Net cash flow 89000
Op cash 6000
Closing cash 95000

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Cash Flow Statement of Tata motors ( Example)
Cash flows from operating activities:
Profit/(loss) for the year (7,289.63) 2,020.60
Adjustments for:
Depreciation and amortisation expense 3,375.29 3,098.64
Allowances for trade and other receivables 65.35 170.90
Inventory write down (net) 84.50 42.13
Provision for loan given to/investment in subsidiary companies/joint venture 385.62 241.86
Exceptional item- others - 109.27
Provision for impairment of Passenger Vehicle Business 1,418.64 -
Provision for Onerous Contracts 777.00 -
Share-based payments 4.70 8.44
Marked-to-market loss/(gain) on investments measured at Fair value through profit 0.43 (1.90)
or loss
Write off/(reversal) of provision for impairment of capital work-in-progress (73.03) 180.66
and intangibles under development (net)
Loss on sale of assets (net) (including assets scrapped/written off) 168.04 223.94
Profit on sale of investment in a subsidiary company - (332.95)
Profit on sale of investments at FVTPL (net) (70.16) (69.27)
Gain on fair value of below market interest loans - (13.37)
Tax expense (net) 162.29 378.33
Finance costs 1,973.00 1,793.57
Interest income (483.72) (335.87)
Dividend income (241.22) (1,526.25)
Foreign exchange loss (net) 182.32 178.26
7,729.05 4,146.39
Cash flows from operating activities before changes in following assets and 439.42 6,166.99
liabilities

Trade receivables 1,168.02 164.50

Loans and advances and other financial assets 53.29 (276.11)
Other current and non-current assets 22.78 204.77
Inventories 730.01 966.00
Trade payables and acceptances (2,688.95) (725.29)
Other current and non-current liabilities (1,165.05) 323.95
Other financial liabilities 201.38 (892.00)
Provisions (122.95) 542.04
Cash generated from/(used in) operations (1,362.05) 6,474.85
Income taxes paid (net) (92.54) (182.22)
Net cash from/(used in) operating activities (1,454.59) 6,292.63
Cash flows from investing activities:
Payments for property, plant and equipments (2,748.60) (2,790.45)
Payments for other intangible assets (1,919.98) (1,993.03)
Proceeds from sale of property, plant and equipments 155.16 30.25
Redemption of investments in Mutual Fund (net) 358.87 413.74
Investments in subsidiary companies (467.00) (837.98)
(Purchase)/sale of business from/to subsidiary company 25.82 (0.10)
Loan given to joint ventures - (3.75)
Loan given to subsidiary companies (7.79) (0.50)
Sale of Investment in a subsidiary company - 532.96
Sale of Investment in other companies - 5.18
Increase in short term inter corporate deposit (net) (10.07) (2.00)
Deposits with financial institution (1,000.00) (500.00)
Realisation of deposits with financial institution 750.00 -

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 ANALYSIS

1.)The company has no effect on the foreign exchange fluctuation, cash

and cash equivalents of subsidiaries under liquidations.
2.)The company do not offer the preference share capital to the share
holders, miscellaneous expenses and deposits.
3.)The company uses the cash and cash equivalents more in the fuel and
power cost compared to the workers salary.
4.)The customers or passengers are increased to 1,76,460 billion people
in 2015 when compared to 1,46,876 billion people in 2011.
5.)The air-crafts of Jet Airways are gradually increased for the term of
five years from 2011- 2015.

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 CONCLUSION

The cash flow statement shows the details of change

in(increase/decrease) of the cash and cash equivalents in operating
activities, investing activities and financing activities as well as net
change of the cash and cash equivalents in the special treatments. It
also contains the net change in cash during the period. When the
opening cash and cash equivalents are added to this net change the sum
to be obtained is the closing balance of the cash and cash equivalent.8
The income statement is used to find out the difference between the
revenue and income of the firm whereas the cash flow statement is
used to find out the usage of the cash in the firm for the given period of
time. The cash flow statement gives the clear idea about the usage of
the working capital. Therefore the hypothesis of the research is proved
that the cash flow statement is not similar to the funds flow statement.
The cash flow statement is considered as a standard financial statement,
the financial performance of the company can be identified. Some
managers can’t able to manage the cash and cash equivalents and they
will not be able to invest their share in the expertise firm to get the
profit. Therefore, the cash flow statement will be very useful to such
managers.

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 BIBLIOGRAPHY

1. Acharya, V. V. & Pedersen, L. H. (2005) 'Asset Pricing with

Liquidity Risk', Journal of Financial Economics, Vol. 77 No. 2, pp. 375-
410.
2. Adamia, R., Goughb, O., Muradoglu, G. & Sivaprasadd, S. (2010)
'Returns and Leverage'. 2010 Oxford Business & Economics Conference
Program. St. Hugh’s College, Oxford University, Oxford, UK [online]
http://gcbe.us/2010_OBEC/data/Roberta%20Adami,%20Orla%20Gough,
%20Gulnur%20Muradoglu,%20Sheeja%2 0Sivaprasad.pdf (Accessed 31
January 2014).
3. Agrawal, M., Huang, J. & Boland, J. (2013a) 'Probabilistic
Forecasting of Wind Farm Output'. 20th International Congress on
Modelling and
Simulation.Adelaide,Australia[online]http://www.mssanz.org.au/modsi
m2013/G1/agrawal.pdf (Accessed 2 Septembre 2016).
4. Agrawal, M. R., Boland, J. & Ridley, B. (2013b) 'Analysis of Wind
Farm Output: Estimation of Volatility Using High-Frequency Data',
Environmental Modeling & Assessment, Vol. 18 No. 4, pp. 481-492.
5. BOOKS NCERT

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