INTRODUCTION

INTRODUCTION OF CASH MANAGEMENT:

Cash in a business enterprise is important to strengthen the profits of the business
organization similar to that of the blood as is to human body that gives life and
strength to the human body. Cash is the beginning as well as the end of the operating
cycle of a manufacturing concern. It is the basic and it is the also the ultimate output
expected to be realized. Planning for cash requirements is an essential management
function of any business. A control of the cash position is a vital aspect of the
financial management of a concern. The objectives of the cash management are to
make the most effective use of funds on one hand accelerate the inflows and
decelerate the outflows of cash on the other.
Cash management is a broad term that refers to the collection, concentration, and
disbursement of cash. The goal is to manage the cash balances of an enterprise in such
a way as to maximize the availability of cash not invested in fixed assets or
inventories and to do so in such a way as to avoid the risk of insolvency. Factors
monitored as a part of cash management include a company's level of liquidity, its
management of cash balances, and its short-term investment strategies.
A control of cash position is a vital aspect of the financial management of a concern.
The objective of the cash management are to make the most effective use of funds on
one hand and accelerate the inflows and decelerate the outflows of cash on the other.

Purpose
The cash flow Statement was previously known as the flow of funds statement. The
cash flow Statement reflects a firm's liquidity.The balance sheet is a snapshot of a
firm's financial resources and obligations at a single point in time, and the income
Statement Summarizes a firm's financial transactions over an interval of time. These
two financial Statements reflect the accrual basis accounting used by firms to match
revenues with the expenses associated with generating those revenues. The cash flow
statement includes only inflows and outflows of cash and cash equivalents; it excludes
transactions that do not directly affect cash receipts and payments. These noncash
transactions include depreciation or write-offs on bad debts or credit losses to name a
few. The cash flow Statement is a cash basis report on three types of financial

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activities: operating activities, investing activities, and financing activities. Noncash
activities are usually reported in footnotes.
The cash flow statement is intended to provide information on a firm's liquidity and
solvency and its ability to change cash flows in future circumstances
1. Provide additional information for evaluating changes in assets, liabilities and
equity
2. Improve the comparability of different firms' operating performance by eliminating
the effects of different accounting methods
3 indicate the amount, timing and probability of future cash flows
The cash flow Statement has been adopted as a Standard financial Statement because
it eliminates allocations, which might be derived from different accounting methods,
such as various timeframes for depreciating fixed Assets.

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NEED AND IMPORTANCE 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 inflows and outflow of cash and other resources in
a business.
Not only a business owner with a cash flow system will 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.
A cash flow Statement documents the inflow and outflow of 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.

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OBJECTIVES OF THE STUDY:

1) To Study the role of Cash Management in AP Mahesh Bank Co-

operative Urban Bank Ltd
2) To Study the cash inflows and cash outflows of AP Mahesh Co-
operative Urban Bank Ltd
3) To identify opportunities for enhancing efficiencies in the cash
management function.
4) To evaluate the performance of the bank under study in relation to the
sources of cash.

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SCOPE OF THE STUDY:

 Since it will not be possible to conduct a micro level study of all Banking
industries in Andhra
Pradesh, the study is restricted to MAHESH BANK only.
 The study is need to know how cash is managed in different fields like
deposits, investments, loans.
 The study is conducted to know how effectively and efficiently cash is
managed in the bank by
Investing and lending to different Sources.

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RESEARCH METHODOLOGY:
Research is systematic process of collecting and analyzing information (data) in order
to increase our understanding of the phenomenon about which we are concerned or
interested. A Research Design is the framework or plan for a study. It is the blue print
that is followed in completing the study. The basic objective of research cannot be
attained without a proper research design. It specifies the methods and procedures for
acquiring the information needed to conduct the research effectively. It is the overall
operational pattern of the project that stipulates what information needs to be
collected, from which sources and by what methods.

Secondary data:
The Secondary Sources of data include information available on Bank’s site, Cash
flow Statements, Annual reports. Profit and Loss A/C, Balance Sheet.

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LIMITATIONS:

 The information which was collected regarding Cash Management is

restricted only to
Mahesh Co-operative Bank.
 The information which is collected is mostly through secondary data and it is
only for 5 years.
 The study was carried out for a period of 45 days and due to paucity of time
in depth study was not possible.

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 REVIEW OF LITERATURE

Cash Management:
It refers to a broad area of finance involving the collection, handling, and usage of
cash. It involves assessing market liquidity, cash flow and investments. In banking
cash management, or treasury management, is a marketing term for certain Services
related to cash flow offered primarily to larger businesses customers. It may be used
to describe all bank accounts (such as checking accounts) provided to businesses of a
certain size, but it is more often used to describe specific services such as cash
concentration, Zero balance accounting, and automated clearing house facilities.
Sometimes, private banking customers are given cash management Services.
Financial instruments involved in cash management include money market funds,
treasury bills and certificates of deposit. Business analysts report that poor
management is the main reason for business failure. Poor cash management is
probably the most frequent Stumbling block for entrepreneurs. Understanding the
basic concept of cash flow will help you plan for the unforeseen eventualities that
nearly every business faces.

Cash V/s Cash Flow:

Cash is ready money in the bank or in the business. It is not inventory, it is not
accounts receivable (what you are owned), and it is not property. These can
potentially be converted to cash, but be used to pay Suppliers, rent, or employees.
Profit growth does not necessarily mean more cash on hand. Profit is the amount of
money you expect to make over a given period of time, while cash is what you must
have on hand to keep your business running. Over time, a company’s profits are of
little value if they are not accompanied by positive net cash flow. You can’t spend
profit; you can only spend cash.
Cash flow refers to the movement of cash into and out of a business. Watching the
cash inflows and Outflows is one of the most pressing management tasks for any
business. The outflow of cash includes those checks you write each month to pay
Salaries, suppliers, and creditors. The inflow includes the cash you receive from
customers, lenders, and investors.

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Positive cash flow:
If its cash inflow exceeds the outflow, a company has a positive cash flow. A positive
cash flow is a good sign of financial health, but is by no means the only one.
Negative cash flow:
If its cash outflow exceeds the inflow, a company has a negative cash flow. Reasons
for negative cash flow include too much or obsolete inventory and poor collection on
accounts receivable (what your customers owe you). If the company can’t borrow
additional cash at this point, it may be in serious trouble.

What Are the Components of Cash Flow?

A “Cash Flow Statement shows the sources and uses of cash and is typically divided
into three components:
a) Operating Cash Flow:
Operating cash flow, often referred to as working capital, is the cash flow generated
from internal operations. It comes from Sales of the products or Service of your
business, and because it is generated internally, it is under your control.
b) Investing Cash Flow:
Investing cash flow is generated internally from non-operating activities. This
includes investment in plant and equipment or other fixed assets, nonrecurring gains
or losses, or other Sources and uses of cash outside of normal operations.
c) Financing Cash Flow:
Financing cash flow is the cash to and from external sources, such as lenders,
investors and shareholders. A new loan, the repayment of a loan, the issuance of
Stock, and the payment of dividend are some of the activities that would be included
in this section of the cash flow statement.

Cash management techniques

Every business is interested in accelerating its cash collections and decelerating cash
payments So as to exploit its scarce cash resources to the maximum. There are
techniques in the cash management which a business to achieve this objective
1. Liquidity Analysis:
The importance of liquidity in a business cannot be over emphasized. If one does the
autopsies of the business that failed, he would find that the major reason for the

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failure was their inability to remain liquidity. Liquidity has an intimate relationship
with effective utilization of cash. It helps in the attainment of optimum level of
liquidity.
2. Profitable Deployment of surplus funds:
Due to non-synchronization of cash inflows and cash outflows the surplus cash may
arise at certain points of time. If this cash surplus is deployed judiciously cash
management will itself become a profit center. However, much depends on the
quantum of cash surplus and acceptability of market for its short-term investments.
3. Economical borrowings:
Another product of non-synchronization of cash inflows and cash outflows is
emergence of deficits at various points of time. A business has to raise funds to the
extent and for the period of deficits. Rising of funds at minimum cost is one of the
important facts of cash management.

IMPORTANCE OF CASH MANAGEMENT:

Whether it’s an individual or company cash management importance cannot be
ignored. Cash management in simple words refers to managing the cash in such a way
that a company never falls short of cash when it is in need. Let’s look at the reasons
due to which cash management is important for a company.
1. Cash management is particularly important for the those companies who make
Sales as We purchase on credit, since creditor can demand money anytime and
therefore it is important for a company to manage cash
2. In this dynamic business world there is always a Scope of takeover that is company
can buy other company if it thinks that it is undervalued, cash will play a key role for
Successful takeover.
3. Cash management is also necessary to deal with contingencies Such as fire,
breakdown of machinery, payment of compensation in case of any lawsuit going
against the company
4. Since global commodity prices are fluctuating companies need cash in order to take
advantage of decline in the raw material prices of the company’s product
5. Cash management assumes greater importance when company has taken debt,
because interest payments are fixed and company has to pay it, any delay in interest
payment or principal repayment of debt can even result in company becoming
bankrupt, therefore cash should be there for payment of such expense.

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Uses of cash flow statement:
 Since a cash flow statement is based on the cash basis of accounting, it is very
useful in the evaluation of cash position of a firm.
 A comparison of the historical and projected cash flow statements can be
made so as to find the variations and deficiency or otherwise in the
performance so as to enable the firm to take immediate and effective action.
 Cash flow statement helps in planning the repayment of loans, replacement of
fixed assets and other similar long-term planning of cash. It is also significant
for capital budgeting decisions.
 Cash flow statement prepared according to AS-3 (Revised) is more suitable
for making comparisons than the funds flow statement as there is no standard
format used for the same.

Informative value:
The financial consequence of business operation are clearly explained in details by a
cash flow Statement Some of the problems which crop up in the minds of investors
are well Solved by a simple perusal of this Statement for e.g.,
 Where have profit gone.
 Why does an imbalance exist between liquidity position and profitability
position of enterprise?

Forecasting values:
A projected cash flow Statement can be prepared and resources can be properly
allocated after an analysis of the present State of affairs. The optimal utilization of
available cash in necessary for the overall growth of the enterprise. The cash flow
Statement prepared in advance given a clear direction to the management in this
raged. Testing Value: whether the working capital has been effectively is used or not
by the management can well be tested by cash flow Statement. Whether working
capital has been maintained at proper level, and whether it is adequate or inadequate
can be known by a Study of the Statement. The management is warned against the
injudicious uses of cash. Decision-making Value: since overall credit worthiness of
the enterprise is known, creditors and money lenders can decide as to whether they
have to provide loans to company or not. The Sources of raising cash and their
application help the shareholders to decide whether the management of the business is

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an enlightened or not regarding managing cash. Mismanagement of cash may be
prevented. The management can be decided about the future financing policies and
capital expenditure programmers.

FOUR STEPS TO A HEALTHY CASH FLOW:

 Determine the company’s beginning cash balance:
The Statement of cash flows covers the entire accounting period, and so it begins with
the cash balance at Start of the period. This balance can be found on the previous
periods Statement of cash flows (where it will be presented as the ending balance). It
can also be calculated from the balance sheet.
To calculate the beginning cash balance from the balance sheet, add together all cash
and cash equivalents. Cash equivalents will be listed under the “Current Assets’
heading, and can include money market accounts, Savings accounts, and certificates
of deposit.
 Determine the amount of cash the company generated through its
operations:
The first section of a statement of cash flows is titled “Cash Flow from Operating
Activities, and represents all the cash the company raised through its main operations
- generally Sales of its products. This Section can be constructed by adjusting the
company’s net income (obtained from the income statement) to exclude non-cash
transactions.
 The basic formula for arriving at operating cash flow net income is as flows:
 Depreciation expenses should be added back to net income, since they don’t
represent a disbursement of cash. A rise in accounts receivables should be
subtracted, since they represent cash that hasn’t yet been collected (a fall in
receivables should be added). A rise in accounts payable should be added,
since they represent cash that hasn’t been disbursed yet.
 Determine the amount of cash the company spent through its investing
activities:
When a company buys a large asset like a piece of machinery, or when it buys Stock
in other companies, cash is paid out even though the assets are not immediately
presented on the income Statement as expenses. The Second heading of the cash flow
statement, titled “Cash Flow from Investing Activities,” adjusts for these types of
assets.

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  To arrive at the investing cash flow, simply add together all the capitalized
purchases from that accounting period. Any assets that were purchased with
cash and are being held on the balance sheet (such as buildings and
equipment) as well as any Stock purchases should be added together. This
amount will generally be negative, as it represents a cash disbursement.
 Determine the amount of cash the company raised (or used) through its
financial activities:
The third and final heading on the cash flow statement is titled “Cash Flow from
Financing Activities. This section sums all the cash flows from the issuance of debt or
stock, the redemption of debt, and dividends paid to shareholders.
To arrive at the financing cash flow, add together the cash received through the
issuance of Stock or debt (Such as bonds). Subtract any cash paid out to redeem long-
term debts, and Subtract cash paid to shareholders as dividends.
 Cash and Profit
Cash flow and profit is not the same thing. Financial accounting is not focused on
cash flow. It is focused on net income or profit. Over the long term, profit and cash
flow are approximately the same but the crucial difference is timing.
Timing can be so important for a Small business. For example, when you make a sale
to a credit customer, you recognize that Sale immediately on your income Statement.
That’s called accrual accounting. However, you recognize that Sale immediately. On
your cash budget and your statement of cash flows, you don’t show that credit
transaction until you actually receive payment.
You can see how the gap between profit and cash flow could be very large. If you
have rapid growth in credit Sales, for example, profit could far exceed far actual cash
received. This sort of situation makes smaller companies very vulnerable to running
out of cash.
 Cash Budget
Most companies should prepare monthly cash budgets to keep track of their cash. In
fact, cash budget should be done six to twelve months in advance to project cash
needs. The cash budget will capture the timing difference between the profit you see
on the income Statement and the cash that is actually coming into the firm and
flowing out of the firm.
The purpose of the cash budget is not to set targets for cash but to anticipate needs. If
you prepare cash budgets 6-12 months in advance and your needs change, then

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change your cash budgets. Keep them up to date because the cost of running low on
cash in a business is high. You should know that from your own personal finances.
Prepare your budgets conservatively.
Cash budgets can address “what-if” scenarios. You can use them to test different
possible future Scenarios. You can attach a percentage of probability to the future
Scenario and test your assumption. For example, you can change the speed of your
collections or the timing of your inventory purchases and see how it affects your cash
position.
 Cash planning
It is a technique to plan and control the use of cash. It helps to anticipate the
future cash flows and needs of the firm and reduces the possibility of idle cash
balances (which lowers firm’s profitability) and cash deficits
 Large firms prepare daily and weekly forecasts.
 Medium-size firms usually prepare weekly and monthly forecasts.
 Small firms may not prepare formal cash forecasts because of the non-
availability of information and smallscale operations.

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 Difference between Cash Flow Statement and Income Statement

BASIS FOR INCOME STATEMENT CASH FLOW STATEMENT

COMPARISON

The income statement is a part of financial
MEANING statement which is used to show the
revenues, gains, expenses and losses for a
particular accounting period
The cash flow statement is a part
of financial statement which is
used to reflect the inflows and
outflows of cash for a particular
accounting period.

DIVIDED INTO Two activities Three activities

BASIS Accrual Cash

OBJECTIVE To know the profitability and owner's To ascertain the liquidity and
equity. solvency of business

PREPARATION On the basis of various records and ledger On the basis of income statement
accounts. and balance sheet.
DEPRECIATION Considered Not considered

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Difference between Cash Flow Statement and Position Statement
CASH FLOW STATEMENT
1 It is a statement changes in financial
position
2 It shows the amount of changes during
the particular period of time.
3 It does not analyze the change in
current asset and current liability
4 It is analytical statement analyzing
from where they have been
used ,hence more useful
Structure of the cash flow statement
FORMAT OF CASH FLOW STATMENT
PARTICULARS
OPENING BALANCES
Cash in hand
SOURCE OF CASH
Income Tax
Sale of fixed Assets
CASH FROM OPERATION
Net profit
POSITION STATEMENT
It is statement of financial position.
It present the amount of assets and
liabilities at a particular point of time.
It shows all the accounting liabilities
whether current or non- current.
It is not analytical statement hence not
that much useful for decision making as
the cash flow statement.
AMOUNT AMOUNT
XXX
XXX
XXX
XXX
XXX

ADD:- Increase in other liabilities XXX

Decrease in Inventories XXX

LESS:- Decrease in Sundry XXX

Creditors
Increase In Sundry Debtors XXX XXX
TOTAL CASH AVAILABLE XXX
APPLICATION OF CASH
Loans and Advances XXX
Secured Loan XXX
Unsecured Loan XXX
Central Excise XXX
CLOSING BALANCE
Cash in Hand XXX
TOTAL APPLICATION XXX
AVAILABLE

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Cash flow activities
The cash flow statement is partitioned into three segments, namely:
1) Cash flow resulting from operating activities;
2) Cash flow resulting from investing activities
3) Cash flow resulting from financing activities.
The money coming into the business is called cash inflow, and money going out from
the business is called cash outflow.
Operating activities
Operating activities include the production, sales and delivery of the company's
product as well as collecting payment from its customers. This could include
purchasing raw materials, building inventory, advertising, and shipping the product
Operating cash flows include:
 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
 Payments to suppliers for goods and services
 Payments to employees or on behalf of employees
 Interest payments (alternatively, this can be reported under financing activities in
IAS 7, and US GAAP)
 buying Merchandise
Items which are added back to [or subtracted from, as appropriate] the net income
figure (which is found on the Income Statement) to arrive at cash flows from
operations generally include:
 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 non-current asset, because
associated cash flows do not belong in the operating section.(unrealized
gains/losses are also added back from the income statement)
 Dividends received
 Revenue received from certain investing activities

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Investing activities:-
All transactions which have long term impact and pertaining to non –current assets
will appear here.
Examples of investing activities are
 Purchase or Sale of an asset (assets can be land, building, equipment, marketable
securities, etc.)
 Loans made to suppliers or received from customers
 Payments related to mergers and acquisition.
 Proceeds from issuing short-term or long-term debt

Financing activities
Financing activities include the inflow of cash from investors such
as banks and shareholders, as well as the outflow of cash to shareholders
as dividends as the company generates income. Other activities which impact the
long-term liabilities and equity of the company are also listed in the financing
activities section of the cash flow statement. It includes
 Payments of dividends
 Payments for repurchase of company shares
 For non-profit organizations, receipts of donor-restricted cash that is limited to
long-term purposes
Items under the financing activities section include:
 Dividends paid
 Sale or repurchase of the company's stock
 Net borrowings
 Payment of dividend tax.

Two methods of preparing cash flows:-

a) Direct Method:
Under the direct method, you are basically analyzing your cash and
bank accounts to identity cash flows during the period. You could use a detailed
general ledger report showing all the entries to the cash and bank accounting, or you
could use the cash receipts and disbursement journals. You would then determine
should be reported on the cash flow statement.

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Another way to determine cash flows under the direct method is to prepare a
worksheet for each major line item, and eliminate the effects of accrual basis
accounting in order to arrive at the net cash effect for that particular line item for the
period. Some examples for the operating in activities Section include:

Cash receipts from customers:

 Net sales as per the income statement
 Plus beginning balance in accounts receivable
 Minus ending balance in accounting receivable
 Equals cash receipts from customers

Cash payments for inventory:

 Ending inventory
 Minus beginning inventory
 Plus beginning balance in accounts payable to vendors
 Minus ending balance in accounts payable to vendors
 Equals cash payments for inventory

Cash paid to employees:

 Salaries and wages per the income Statement
 Plus beginning balance in Salaries and wages payable
 Minus ending balance in Salaries wages payable
 Equals cash paid to employees

Cash paid for operating expenses:

 Operating expenses as per the income statement
 Minus depreciation expenses
 Plus increase or minus decrease in accrued expenses
 Equals cash paid for Operating expenses

Taxes paid:

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  Tax expanse as per the income statement
 Plus beginning balance in taxes payable
 Minus endings balance in taxes payable
 Equals taxes paid

Interest paid:
 Interest expenses as per the income statement
 Plus beginning balance in interest payable
 Minus ending balance in interest payable
 Equals interest paid
Under the direct method, for this example, you would then report the following in the
cash flows from operating activities section of the cash flow statement:
 Cash receipts from customers
 Cash payment for inventory
 Cash paid to employees
 Cash paid for operating expenses
 Taxes paid
 Interest paid
 Equals net cash provided by (used in) operating activities similar types of
calculations can be made of the balance sheet accounts to eliminate the effects
of accrual accounting and determine the cash flows to be reported in the
investing activities and financial activities Sections of the cash flow statement.
b) Indirect method:
In preparing the cash flows from operating activities Section under
the indirect method, you start with net income as per the income statement, reverse
out entries to income and expense accounts that do not involve a cash movement, and
show the changes in net working capital. Entries that affect net income but do not
represent cash flows could include income you have earned but not yet received
amortization of prepaid expenses, accrued expenses, and depreciation or amortization.
Under this method you are basically analyzing your income and expense accounts,
and working capital. The following is example of how the indirect method would be
presented on the cash flow Statement:
 Net income as per the income statements

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  Minus entries to income accounts that do not represent cash flows
 Plus entries to expense accounts that do not represent cash flows
 Equals cash flows before movement in working capital
 Plus or minus the changes in working capital, as follows:

 An increase in current assets (excluding cash and cash equivalents) would be

shown as a negative figure because cash was spent or converted into other
current assets, thereby reducing the balance.
 A decrease in current assets would be shown as a positive figure, between
other current asset were converted into cash.
 An increase in current liability (excluding short-term debt which would be
reported in the financial activities section) would be shown as a positive figure
since more liabilities mean that less cash was spent.
 A decrease in current liabilities would be shown as a negative figure, because
cash was spent in order to reduce liabilities.

The net effect of the above would then be reported as cash provided by (used in)
operating activities. The cash flows from investing activities and financing activities
would be presented the same way as under the direct method.

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 INDUSTRY PROFILE
Banks are among the main participants of the financial system in Indian. Banks in
India can be categorized into non-scheduled banks and scheduled banks. Scheduled
banks constitute of commercial banks and co-operative banks. In terms of ownership,
commercial banks can be further grouped into nationalized banks, the State Bank of
India and its group banks, regional rural banks and private Sector banks (the old/new
domestic and foreign). During the first phase of financial reforms, there was a
nationalization of 14 major banks in 1969. This crucial step led to a shift from Class
banking to Mass banking. Since then the growth of the banking industry in India has
been a continuous process. It has become an important tool to facilitate the
development of the Indian economy.

During the Second phase of reforms, in the early 1990s, the Narasimha Rao
Government embarked on a policy of liberalization and gave licenses to a small
number of private banks, which came to be known as New Generation tech-savvy
banks, which included bank such as UTI Bank (now re-named as Axis Bank) (the first
of such new generation banks to be set up), HDFC Bank and ICICI Bank. This
move, along with the rapid growth in the economy of India, kick started the banking
Sector in India, which has 88 scheduled commercial banks (SCBS) – 28 public Sector
banks (that is with the Government of India holding a stake), 29 private banks (these
do not have government Stake; they may be publicly listed and traded on Stock
exchanges) and 31 foreign banks. They have a combined network of over 53,000
branches and 17,000 ATMs. According to a reporting to a report by ICRA Limited, a
rating the public sector banks hold over 75 percent of total 26 Assets of the banking
industry, with the private and foreign banks holding 18.2%and 6.5% respectively.
There are 70324 bank office serves around 16000 people. It’s a huge banking
infrastructure and among best banking network in World.

Current Scenario: as far as the present scenario is concerned the banking industry is in
transition phase. The Public Sector Banks, which are the mainstay of the Indian
Banking System account, are unfortunately burdened with excessive Nonperforming
assets massive manpower and lack of modern technology. While on the other hand the
private Sector Banks are consolidating themselves through mergers and acquisitions.

22
On the other hand the private Sector Banks in India are witnessing immense progress
they have pioneered internet banking, mobile banking, phone banking ATMS etc.,
they are foreign ahead and rewriting the traditional banking business model by way of
their sheer innovation and Service.

The banks today are more market driven and market responsive. The top concern in
the mind of every banks CEO is increasing or at least maintaining the market share in
every line of business against the backdrop of heightened competition. With the entry
of new players and multiple channels, customers have become more discerning and
less “loyal to banks. This makes it imperative that banks provide best possible
products and Services to ensure customer satisfaction. To address the challenge of
retention of customers, there have been active efforts in the banking circles to switch
over to customer centric business model.

The success of such a model depends upon the approach adopted by banks with
respect to customer data management and customer relationship management. There
has been an increase in the bank focus on retail segment with the economic
slowdown. Retail banking has become the new mantra for banking industry. Banks
are now realizing that one of their best assets for building profitable customer
relationships especially in a developing country like India is the branch. Branches are
in fact a key channel for customer retention and profit and growth in rural and Semi
urban Set up. Branches could also be used to inform adequate customer about other,
more efficient channels, to advise on and sell new financial instruments like consumer
loans, insurance products, mutual funds products, etc. Thus, all the above led to the
practice of banc assurance. The Reserve Bank of India being the regulatory authority
of the banking system, with their organization of the need for the need for banks to
diversify their activities at the right time, permitted them to enter into insurance
Sector as well. It has issued a set of detailed guidelines setting out various ways for a
bank in India to enter into insurance sector.
IRDA has also felt the necessity of introducing an additional channel of distribution,
which is the Banc assurance to reach out more people. It started picking up after
Insurance Regulatory and Development Authority (IRDA) passed notification in
October 2002 on corporate Agency regulations. Legal Requirements: in India, the
banking and insurance sectors are regulated by two different entities (banking by RBI

23
and insurance by IRDA) and bank insurance being the combinations of two sectors
comes under the purview of both the regulators. Each of the regulators has given out
detailed guidelines for banks getting into insurance sector. Highlights of the
guidelines are reproduced below RBI guidelines for bank getting into insurance
Sector provides three options for banking

PROFILE OF BANKING
Indian banking is the lifeline of the nation and its people. Banking has helped in
developing the vital Sector of the economy and usher in new dawn of progress on the
Indian horizon. The sector has translated the hopes and aspirations of millions of
people into reality. But to do so, it has had to control miles and partition. Today,
Indian banks can confidently complete with modern banks of the world.
Before the 20th century usury, or lending money at a high rate of interest, was widely
prevalent in rural India. Entry of joint Stock banks and development of cooperative
movement have taken over a good deal of business from the hands of the Indian
money lenders, who although still exist, have lost his menacing teeth.
In the India Banking System, cooperative banks exist side with commercial banks
and play a Supplementary role in providing need-based finance, especially for
agriculture-based operations including farming, cattle, milk, hatchery, personal
finance etc., Along with Some Small industries and Self-employment driven
activities.
Generally, co-operative banks are governed by the respective co-operative acts of
state governments. But, since banks began to be regulated by the RBI after 1 st march
1949, these banks are also regulated by the RBI after amendment to the Banking
Regulations Act 1949. The Reserve Bank is responsible for licensing of banks and
branches, and it also regulates credit limits to State co-operative banks on behalf of
primary co-operative banks financing SSI units.
Banking in India originated in the first decade of 18 th century with the General bank
of India coming into existence in 1786. This was followed by Bank of Hindustan.
Both these banks are now defunct. After this, the Indian government established three
presidency banks in India. The first of three was the Banks of Bengal, which obtains
charter in 1809, the other two presidency banks, viz. the banks of Bombay and the
bank of Madras, were established in 1840 and 1843, respectively. The three
presidency banks were subsequently amalgamated into the imperial Bank of India

24
Act, 1920 which is now known as the State Bank of India.
A couple of decades later, foreign banks like Credit Lyonnais started Calcutta
operations in the 1850s. At the point of time, Calcutta was most active trading port,
mainly due to the trade of the British Empire and due to which banking activity took
roots there and prospered. The first fully Indian Owned banks was the Allahabad
Bank, was established in 1865.
By the 1900s, the market expanded with the established of bank such as Punjab
national Banks, in 1895 in Lahore and Bank of India, in 1906 in Mumbai both of
which were founded under private ownership. The Reserve Bank of Indian formally
took on the responsibility of regulating the Indian Banking Sector from 1935. After
India’s independence in 1947, the Reserve Bank was nationalized and given broader
powers.
As the banking institutions expand and become increasingly complex under the
impact of deregulation, innovation and technological up gradation, it is crucial to
maintain balance between efficiency and Stability. During the last 30 years since
nationalization tremendous changes have taken place in the financial markets as well
as in the banking industry due to financial Sector reforms. The financial markets as
well as in the banking industry due to financial Sector reforms. The banks have shed
their traditional functions and have been innovating, improving and coming out with
new types of Services to cater emerging needs of their customers. Banks have been
given greater freedom to frame their own policies.
Rapid advancement of technology has contributed to significant reduction costs,
facilitated greater diversification of portfolio and improvements in credit delivery if
banks. Prudential norms, in line with international Standards, have been put in place
for promoting and enhancing the efficiency of banks. The process of institution
building has been strengthened with several measures in the areas of debt recovery,
asset reconstruction and securitization, consolidation, convergence, mass banking etc.
Despite this commendable progress, serious problem have emerged reflecting in
decline in productivity and efficiency, and erosion of the profitability of the banking
Sector. There has been deterioration in the quality of loan portfolio which in turn, has
come in the way of banks income generation and enhancement of their capital funds.
Inadequacy of capital has been accompanied by inadequacy of loans loss provision
resulting into the adverse impact on the depositors and investor’s confidence. The
government therefore, setup Narasimhama committee to look into the problems and

25
recommend measures to improve the health of the financial System.
The acceptance of the Narasimhama committee recommendation by the government
has resulted in transformation of hitherto highly regimented and over bureaucratized
banking system into market driven and extremely competitive one.
The massive and Speedy expansion and diversification of banking has not been
without its Strain. The banking industry is entering a new phase in which it will be
facing increasing competition from non-banks not only in the domestic market but in
the international markets also. The operational Structure of banking in India is
expected to undergo a profound change during the next decade with the emergence of
new private banks.
The private bank Sector has become enriched and diversified with focus spread to the
wholesale as well as retail banking. The existing banks have wide branch network and
geographic spread, whereas the new private banks have the clout of massive capital,
lean personnel component, the expertise in developing sophisticated financial
products and use of State-of-the-art technology.
Gradual deregulation that us being ushered in while stimulating the competition
would also facilitate forging mutually beneficial relationships which would ultimately
enhance the quality and content of banking. In the final phase, the banking system in
India will give a good account of itself only with the combined efforts of cooperative
banks, regional rural banks and development banking institutions which are expected
to provide an adequate number of effective retail outlets to meet the emerging Socio-
economic challenges during the next two decades. The electronic fund transfer.
However the development of electronic banking has also led to new areas of risk Such
as data security and integrity requiring new techniques of risk management,
cooperative (mutual) banks are an important part of any financial systems.
In a number of countries, they are among the larger financial institutions when
considered as a group. Moreover, the share of cooperative banks has been increasing
in recent years, in the sample of banks in advanced economies and emerging markets
analyzed in this paper, the market share of cooperative banks in terms of total banking
sector assist increased from about in mid 1990s to about 14 percent in 2004.

26
INDUSTRY SCENARIO OF INDIAN BANKING INDUSTRY:
The growth in the Indian banking industry has been more qualitative than quantitative
and it is expected to remain is same in the coming years. Based on the projections
made in the “Indian vision 2020' prepared by the planning commission and the draft
10th plan, the report forecasts that the pace of expansion in the balance-sheets of banks
is likely to decelerate. The total assets of all Scheduled commercial banks by end-
march 2010 is estimated to grow at a annual composite rate of 13.4 percent that
existed between 1994-95 and 2002-03. It is expected that there will be large additions
to the capital base and reserves on the liability side.
The India banking industry which is governed by the banking regulation act of India,
1949 can be broadly classified into two major categories, nonscheduled banks and
scheduled banks. Scheduled banks comprise commercial banks and the co-operative
banks. In terms of ownership, commercial banks regional rural banks and private
sector banks. These banks have over 67000 branches spread across the country.
The public sector banks (PSBS) which are the base of the banking sector in India
account for more than 78 percent of the total banking industry assets. Unfortunately
they are burdened with excessive non performing assist (NPAS). Massive manpower
and lack of modern technology. On the other hand the private Sector banks are
making tremendous progress. They are leaders in internet banking, mobile banking,
phone banking, ATMs. As far as foreign banks are concerned they are likely to
succeed in the Indian Industry.
In the India banking Industry some of the private sector banks operating are IDBI
banks, SBI commercial and International bank Ltd, banks of Rajasthan Ltd. And
banks from the public Sector include Punjab national banks, Vijaya banks, UCO
banks oriental banks, Allahabad banks among others. ANZ Grind lays banks, ABN-
AMRO banks ltd, Citibank are some of the foreign banks operating in the Indian
banking industry.
As far as the present Scenario is concerned the banking Industry in India is going
through a transitional phase. The first phase of financial reforms resulted in the
nationalization of 14 major banks in 1969 and resulted in a shift from class banking to
mass banking. This in turn resulted in a significant growth in the geographical
coverage of banks. Every bank had to earmark a minimum percentage of their loan
portfolio to Sector identified as “priority sectors’. The manufacturing Sector was a
critical Source. The next Wave of reforms saw the nationalization of 6 more

27
commercial banks in 1980. Since then the number of scheduled commercial banks
increased four-fold and the number of bank branches increased eight-fold.
The new private Sector banks first made their appearance after the guidelines
permitting them were issued in January 1993. Eight new private sector banks are
presently in operation. These banks due to their late start have access to state-of-the-
start technology, which in turn helps them to save on manpower costs and provide
better services.
During the year 2000, the state banks of India (SBI) and its 7 associates accounted for
a 25 percent share in deposits and 28.1 percent of share in credit.
The 20 nationalized banks accounted for 53.2 percent of the deposit and 47.5 percent
of credit during the same period.
The share of foreign banks accounted for 5.7 percent, 3.9 percent and 12.2 percent
respectively in deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively
in credit during the year 2000.

CHALLENGES FACING BY BANKING INDUSTRY:

The bank marketing is than an approach to market the service profitability. It is a
device to maintain commercial viability. The changing perception of bank marketing
has made it a social process. The significant properties of the holistic concept of
management and marketing has made bank marketing a device to establish a balance
between the commercial and social considerations, often considered to be opposite of
each other. A collaboration of two words banks and marketing thus focuses our
attention on the following:
 Banks marketing is a managerial approach to survive in highly competitive
market as well as reliable Service delivery to target customers.
 It is a Social process to sub serve social interests.
 It is a fair way of marking profits.
 It is an art to make possible performance Orientation.
 It is a professionally tested skill to excel competition.
USERS OF BANKING SERVICES:
The emerging trends in the level of expectation affect the formulation of marking mix.
Innovative efforts become essential the moment it finds a changes in the level of
expectations. There are two.

28
General Users:
Personal having an account in the banks and using the banking facilities at the terms
and conditions fixed by a bank are known as general users of the banking services.
Generally, they are the users having Small sized and less frequent transactions or
availing very limited services of banks.
Industrial Users:
The industrialists, entrepreneurs having an account in the banks and using credit
facilities and other Service for their numerous operations like establishments and
expansions,merges, acquisitions etc., of their business are known as industrial users.
Generally, they are found a few but large sized customers.

BANKING INDUSTRY VISION 2020:

Emerging economic scene:
The financial System is the lifeline of the economy. The changes in the economy get
mirrored in the performance of the financial system, more so of the banking industry.
The committee therefore felt it would be desirable to look at the direction of growth
of the economy while drawing the emerging contours of the financial system. The
“India vision 2020” prepared by the planning commission, government of India, is an
important document, which is likely to guide the policy makers, in the years to come.
The committee has taken into consideration the economic profile drawn in India
vision 2020 document while attempting to visualize the future landscape of banking
Industry.India vision 2020 envisages improving the ranking of India from the present
11th to 4th among 2007 countries given in the world development report in terms of the
gross domestic product (GDP). It also envisages moving the country from a low-
income nation to an upper middle-income country. To achieve this objective, the India
vision aims to have an annual growth in the GDP of 8.5 percent to 9 percent over the
next 20 years. Economic development of this magnitude would see quadrupling of
real percent income. When compared with the average growth in GDP of 4-6% in the
recent past, this is an ambitious target. This would call for considerable investments in
the infrastructure and meeting the funding requirements of a high magnitude would be
a challenge to the banking and financial system. India Vision 2020 sees a nation of
1.3 billion people who are better educated, healthier and more prosperous. Urban
India would eco pass 40% of the population as against 28% now.

29
FUTURE LANDSCAPE OF INDIAN BANKING:
The traditional banking functions would give way to a system geared to meet all the
financial needs of the customer. We could see emergence of highly varied financial
products, which are tailored to meet Specific needs of the customer in the retail as
well as corporate segments. The advent of new technologies could see the emergence
of new financial players doing financial intermediation. For example, we could see
utility service providers offering say, bill payment Services or Supermarkets or
retailers doing basic lending operations. The conventional definition of banking might
undergo changes.
The competitive environment in the banking sector is likely to result in individual
players working out differentiated Strategies based on their strength and market
niches. For example, some players might emerge as Specialists in mortgage products,
credit cards etc. whereas some could choose to concentrate on particular Segments of
business system, while outsourcing all other functions. Some other banks may
concentrate on SME segments or high net worth individuals by providing specially
tailored Services beyond traditional banking offerings to satisfy the needs of
customers they understand better than a more generalist competitor.
Retail lending will receive greater focus. Banks would compete with one another to
provide full range of financial Services to this segment. Banks would use multiple
delivery channels to suit the requirements and tastes of customers. While some
customers might value relationship banking (conventional branch banking), others
might prefer convenience banking (e-banking).
Structure and ownership pattern would undergo changes. There would be greater
presence of international players in the India financial system. Similarly, some of the
Indian banks would become global players. Government is taking steps to reduce its
holdings in Public sector banks to 33%. However the indications are that their PSB
character may still be retained.
Mergers and acquisitions would gather momentum as managements will strive to
meet the expectations of Stakeholders. This could see the emergence of 4-5 world
class Indian Banks. AS Banks Seek niche areas, we could see emergence of some
national banks of global scale and a number of regional players. Corporate
governance in banks and financial institutions would assume greater importance in the
coming years and this will be reflected in the composition of the Boards of Banks.
Concept of social lending would undergo a change. Rather than being seen as directed

30
lending such ending would be business driven. With SME sector expected to play a
greater role in the economy, Banks Will give greater overall focus in this area.
Changes could be expected in the delivery channel issued for lending to Small
borrowers and agriculturalists and unorganized sectors (micro credit). Use of
intermediaries or franchise agents could emerge as means to reduce transaction costs.
Technology as an enabler is separately discussed in the report. It would not be out of
place, however, to state that most of the changes in the landscape of financial sector
discussed above would be technology driven. In the ultimate analysis, successful
institutions will be those which continue to leverage the advancement in technology in
re-engineering process and delivery modes and offering State-of-the-art product and
services providing complete financial solutions for different types of customers.
Human Resources Development would be another key factor defining the
characteristics of a Successful banking institution. Employing and retaining skilled
workers and specialists, retraining the existing work force and promoting a culture of
continuous learning would be a challenge for the banking institutions.

31
 COMPANY PROFILE

GENESIS:
Registered in the year 1977 and commenced its operations on 09-08-1978, popularly
known as “MAHESH BANK*
Initial share capital: Rs.4.40 Lakhs with 2200 shareholders.
Current share capital: Rs.13.13 crores with about 37500 shareholders.
SCHEDULED AND MULTI-STATE STATUS:
Conferred Scheduled Status by RBI in the year 1996 and become first multi-State
Scheduled bank in South India in the year 2001
VISION:
“To make brand “MAHESH BANK synonymous to trust and reliability, to be a leader
amongst the Multi-state Scheduled Co-operative Banks in the whole of South India, to
provide excellence and personalized services and to contribute to movement making
credit available to the customers and more particularly to individuals and SMEs, there
by contributing to their growth and Striving to keep net NPAs at 0% level.”
MISSION:
During the tenure of existing board, we will strive to reach the business turnover of
Rs. 1200 crores, Net Profit of Rs.15 crores, Low cost Deposits to Total deposit at
35%, Gross NPA to maintain below 5% CD ratio to reach to 70% by the year 2015.
BRANCHES:
There are 44 branches, 34 in twin cities of Hyderabad and Secunderabad, 7 in districts
of Telangana one each at Jaipur & Bhilwara (Rajasthan) and Mumbai (Maharashtra)

HUMAN RESOURCE DEVELOPMENT:

General Manager extends his valuable support to Managing Director and CEO in day-
today functioning of the bank. The bank has its own staff training Centre to import in-
house training. The bank conducts several training and welfare programs. Staff is
deputed for advance training at college of Agricultural Banking (RBI), National
Institute of Bank Management, VAMNICOM etc...There are 450 employees
consisting professional executives, management, officers and staff.

32
CORPORATE GOVERNANCE:
Established Sound practices with ethical Standards and transparency of accounting
Systems and procedures the bank is paying dividends uninterruptedly for the last 29
years.

REGULATORY COMPLANCE:
Rated as GRADE-1 as per RBI classification norms and continues to be rated as : A
under Audit classification since inception. CRAR is about 31% as against 9%
prescribed by RBI. The bank has achieved the targets in priority sector and weaker
Section advances. 0% net NP.

CONTRIBUTION TO CO-OPERATIVE MOVEMENT:

This is the 1st co-operative urban bank to receive the honor through the then chairman
Sri B.N Rathi Ji from the hon’ble chief Minister of A.P during the centenary
celebration of India Co-operative movement. This bank is the first A.P Region to get
authorized Dealer Category-II license. Mahesh Bank is the first to get Scheduled and
multi-state status in South India.
AUDITING:
The bank audit is being conducted regularly. Concurrent audit of some large branches
and head office is being done on an ongoing basis in accordance with the guidance of
RESERVE BANK OF INDIA and remaining by professional chartered account firms.
Statutory audit for the 2007-2008 has been conducted as required under the multi-
state co-operative Societies Act, 2002 by M\S. Venugopal and Chenoy.

Target for the Year Ending 31.03.2018

Mahesh Bank has set to scale new heights. By the financial year end31.03.2018, the
bank ambitions to achievers.3800 Crores business & net NPAs contribute to be
maintained at 0% level

33
SOME OF THE FEATURES OF THE BANK ARE:
 It has about 37500 shareholders.
 Prompt and personalized service since 30 years.
 Professional and dedicated team of over 450 Staff.
 Managed by experienced and dedicated board of directions.
 Members of the bank exempted from TDS on interest on deposit with the
bank.
 Speedy processing and quick disbursal of all types of loans.
 Banks offers life insurance Solutions.
 The bank facilities the customers by providing locker facility at all branches.
 The bank facilitates to do any other form of business as specified in clause(1)
of Section 6 of the Banking Regulation Act, 1949 (As application to co-
operative Societies).
 The bank collects and transmits money and securities.
 All branches are under core banking solution (anywhere banking).
 The bank has introduced various deposits and loans products to Suit customer
needs.
 The bank facilitates to do all such other things as are incidental and conductive
to the promotion (or) advancement of these objects and the business of the
bank.
 To amalgamate with another bank with same (or) similar objects.

34
 DATA ANALYSS AND INTERPRETAON

Data analysis and interpretation will give a clear about cash inflows and cash outflows
and their impact on the functioning of the banks.
Cash management is all about how well the cash inflows and cash outflows and cash
outflows are managed.
 Inflows would be the various deposits and investment with banks.
 Outflows would be the various types of loans granted by banks.
Generally a cash flow statement can be studied under three main activities:
1. Operating activities: cash flow from operating activities is a section of the cash
flow Statement that provides information regarding the cash generating abilities of
banks core activities.
Cash flow from operating activities is generally calculated according to the following
formula:
Cash flow from operating activities =net income + non-cash expenses + changes in
working capital
The noncash expenses are usually the depreciation and/ or amortization expensed
listed on the firm’s income statement.
A Statement of cash flows typically breaks out a company’s cash sources and uses for
the period into three categories:
a) Cash flows from operating activities.
b) Cash flows from investing activities.
c) Cash flows from financing activities.

Cash flows from operations primarily measures the cash generating abilities of the
company’s core operations rather than from its ability to raise capital or purchased
assets.Because working capital is a component of cash flow from operations,
investors should be aware that companies can influence cash flow from operating
activities by lengthening that time they take to pay the bills (thus preserving their
cash), shortening the time it take to collect what’s owed to them (thus accelerating the
receipt of cash), and putting off buying inventory (again thus pre Serving cash). It is
also important to note that companies also have some way about what items are or not
considered capital expenditures and the investor should be aware of this when

35
comparing the cash flow of different companies.
It is important to note that cash flow is not the same as net income, which includes
transactions that did not involve actual transfers of money (depreciation is common
example of a noncash expense that is included in net income calculation but not in
cash flow calculations).
It is important to note that cash helps companies expand, develop new products, buy
back Stock, pay dividends, or reduce debt. This is why some people value cash flow
statement more than just about any other financial statement or measure out there,
including earning per share it’s also why many analysts look to cash flow from
operations for insight into the core of a company’s cash generating engine.
Almost all cash flow measures are influenced heavily by the state of company’s cash
from operations, which in turn is heavily influenced by a company’s net income.
Thus, higher revenues, lower overhead and more efficiency are big drivers of cash
flow from operating activities. For these reasons, investors often hunt for companies
that have high or improving cash flow from operations but low share prices the
disparity often means the share price will soon increase. This cash flow from
operating activities can be shown in the form of table by comparing it with the
previous year cash flows statements.

36
 Cash flows from operating activities relating to the last five years
i.e. 2013,2014,2015,2016 and 2017

S.NO. Particulars 31.03.2013 31.03.2014 31.3.2015 31.3.2016 31.3.2017

1 OPERATING
ACTIVITES
Balance of profit 2813.63 2402.35 2649.27 2982.31 3063.41
and loss account
adjusted for:
Provision and 799.42 353.73 772.54 1511.50 1179.00
Contingencies
Depreciation on 434.85 469.55 301.16 182.68 229.43
fixed assets
Profit on sale of (3.36) (11.94) - 2.37 8.67
asset
Additional provision - - - - -
on investment
Advance written off (50.28) 13.5 4.69 0.97 1.26

Loss on sale of 12.70 - - - -

investment
Decrease in BDDR 50.28 (1.45) - - -
provision

Cash Flow from

i) operating activities
prior to the change 4057.24 3213.59 3727.66 4679.85 4481.77

in assets and
liabilities
Net increase or
decrease in - - - - -

operating assets
Fixed deposits with (688.40) (5000.15) 3807.39 (2834) (863.95)
banks

37
 Investments (14480.37) (7684.22) (7082.25) (14613.95) (20468.08)

Advances to 1557.23 (2151.25) (9123.94) (14120.97) (12461.27)

borrowers
Other operating 481.76 (736.87) (515.72) 100.54 (771.73)
assets
Net - - - - -
(increase/decrease)in
operating liabilities
Deposits from 11422.58 17126.04 12553.41 29083.57 35732.20
depositor
Borrowings - - - - -
Other operating 538.86 529.41 655.86 (745.48) 536.53
liabilities
ii) Cash flow from 2888.90 5296.55 4022.41 1549.54 6185.47
operating activities
prior to other
payments:
Payment of ex-gratia (177.27) (188.34) (204.68) (210.78) (228.81)
Payment out of (6.86) (5.27) (6.04) (4.55) (3.81)
employees welfare
fund
Income tax paid (703.60) (459.55) (750.00) (888.00) (1212.84)
Payment out of (17.48) (19.46) (22.19) (18.55) (20.54)
common good fund
Contribution to co- (17.54) (20.49) - - -
operative educative
fund
Cash flow from 1966.15 4603.44 3039.50 427.66 4719.47
operating activities
(A)

So by referring to the above table cash flow from operating activities is generally

38
calculated according to the following formula:
Cash flow from operating activities = Net Income + Noncash Expenses +
Changes in Working Capital.
Where net income = carried forward balances of the last five years profit and loss
balances.
Noncash expenses would include transactions that did not involve actual transfers of
money i.e.
Depreciation on fixed assets, provisions and contingencies etc., all these are added
back to net income.
Changes in working capital would be difference between net increase and decrease in
changes in operating assets and liabilities of the bank.

Cash flow from operating Activities:

YEARS
4th Qtr; Sales; 1.2; 9%
3rd Qtr;
Sales; 1.4;
10%

2nd Qtr; Sales; 3.2; 23% 1st Qtr; Sales; 8.2; 59%

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

The above data is presented in the form of pie diagram:

39
Interpretation
There was increase in profits of the bank from Rs.2813.63 Lakhs in 2013 to
Rs.3063.41 Lakhs in 2017 i.e. cash flow from operating activities have been
fluctuated.
There was increase in cash flow from operating activities because:
 There was loss on sale of asset in years 2013 &2014, and profit in 2016 &
2017.
 There was no borrowings from the bank during the years 2013 -2017 instead
there was increase in deposits from depositors with the bank.
 There was increase in provision and contingencies from year 2013 -2017

40
2. Investing activities:
Cash from investing activities is a sections of the cash flow statement that provides
information regarding a bank’s purchase or sales of capital assets. Cash flow from
investing activities primarily reflects the company’s purchase or sale of capital assets.
(i.e., assets that appear on the balance sheet and have a useful life of more than one
year). It is important to note that companies have Some Way about what items are or
are not considered capital expenditures, and the investor should be aware of this when
comparing the cash flow of different companies. It is important to note that companies
and investors always like to see positive cash flow from every aspect of a company
operations. After all, without positive cash flow, a company may have to borrow
money to do these things, or in Worse cases, it may not stay in business
However, having negative cash flow for a time is not always a bad thing. If a
company is a net Spender of cash for a time because it is building a second
manufacturing plant, for example, the company`s might show negative cash from
investing activities. Nonetheless, this could pay off for investors later if the plant
generates more cash. On the other hand, if the company has a negative cash flow
investing activities because it is making poor asset-purchase decisions, then the long-
term benefit might not be there.
It is important to note that cash is not the same as net income, which includes
transactions that did not involve actual transfers of money (depreciations is common
example of a non-cash expense that is included in net income calculations but not in
cash flow calculations). Investors often hunt for companies that have high or
improving cash flow but low share prices the disparity often means the share price
will soon increase.

41
This cash flow from investing activities can be shown in the form of table and
Bar chart by comparing it.

S.NO. PARTICULARS 31.03.2013 31.03.2014 31.03.2015 31.03.2016 31.03.2017

2 Investing
activities
Purchase of fixed (326.06) (335.71) (405.84) (944.54) (914.11)
asset (net of
sales)
Cash flow from (326.06) (335.71) (405.84) (944.54) (914.11)
investing
activities(B)

Chart Title
6

5
5
4.4 4.5
4.3
4
3.5
3
3 2.8
2.4 2.5
2 2
2 1.8

0
Category 1 Category 2 Category 3 Category 4

Series 1 Series 2 Series 3

42
Interpretation:-
It can be interpreted from the above table that there was an purchase of fixed assets in
the previous year’s 2013, 2014, 2015, 2016 &2017 which are nothing but cash
outflows for the bank so in the Statement from the amounts are shown with signs
because these are the cash flows which are going out of the bank and there was no
cash inflows in the previous year’s i.e. amount being realized in the form of sale of
investments.

So by referring to the above chart cash flows investing activities was 11%, 11.50%,
13.50%, 32.50% and 31.50% in the year, 2013, 2014, 2015, 2016 &2017 respectively.
By referring to the table of cash flows operating and cash flows investing activities
the difference in the rates in cash from investing is due to the following :-

 In the year 2016 the bank has invested more on purchase of fixed assets
because the
Deposits from depositors in the year 2016 were RS. 29083.57 Lakhs.
 And also the income tax paid during the year 2014 was less i.e. Rs.459.55
Lakhs when compare to 2016 & 2017 respectively.
 So these were the main reason due to which cash flows from investing
activities were less in 2013

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 3. Financing activities:
The Section of the cash flow Statement titled cash Flow from Financing Activities
accounts for inflows and Outflows of cash resulting from debt issuance and financing,
the issuance of any new Stock, dividend payments and repurchase of existing Stock
These cash flows from financing activities can be showing in the form of table and
column chart by comparing it with the previous year cash flows statements.

Cash flow from financing activities:-

S.NO. PARTICULARS 31.03.2013 31.03.2014 31.03.2015 31.03.2016 31.03.2017

3. FINANCING
ACTIVITIES
Share capital received 821.74 44.62 98.54 38.60 46.07
Entrance fee received 8.57 6.94 - - -
Dividend paid (338.91) (481.06) (546.87) (530.89) (566.41)
Cash flow from 491.40 (429.50) (448.33) (492.29) (520.34)
financing activities (C)

6
5
5 4.5
4.3 4.4
4 3.5
3 2.8 Series 1
3 2.5
2.4 Series 2
2 2 1.8 Series 3
2

0
Category 1 Category 2 Category 3 Category 4

Note – Category:- 1 Indicates Financial Year 2013-14

Category:-2 Indicates Financial Year 2014-15
Category:- 3 Indicates Financial Year 2015-16
Category:- 4 Indicates Financial Year 2016-17

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Interpretation
 The bank raises the cash with the help of share capital received Rs.821.74
crores in the year2013, Rs.44.62 crores in year 2014 Rs.98.54 in year 2015,
Rs.38.60 crores in 2016 and Rs. 46.07 Respectively.
 Where the dividend paid in the year (i.e.2013) is less than the total amount
received there by the balance with the bank becomes positive
 So initially there was inflow of funds in banks but due to the more payments
of dividends The figures are being shown negative sign there was maximum
grant of dividends in the year which resulted into more of outflows of cash the
bank.

FINDINGS

45
The various activities Mahesh bank carries
 Operating activities of the bank is able to manage all its funds in a proper
manner. And as the balance of profit & loss are in fluctuating state because of
that cash flow from operating activities fluctuating.
 Most of the fixed deposits have been matured in year 2016.
 Where as in the year 2014, 2015 and 2016 the bank has invested more on
purchase of fixed assets.
 The bank fall the cash with the help of share capital and receives
Rs.82.74crores, RS.44.62crores, Rs.98.54crores, Rs.32.77crores and Rs.33.23
in the year 2013, 2014, 2015, 2016, and 2017 respectively.
 Whereas the dividend paid the five years is less than the total amount received
there by the Balances with the bank turned negative in the year 2016.
 In all, the bank is operating at moderate level and is managing cash at the best
Level to carry out the operations effectively and efficiently however must be
cautions while decision making especially in view of above negative balance
out of dividend decision lead to internal risks.

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 SUGGESTIONS

For the improving the financial performance of the bank the following
Suggestions are made.
 In order to reduce the outside borrowings in the bank has to acquire. The
capital from equity Sources. Keeping in view the debt equity the proportion as
normal.
 The liquidity of the bank should be improved by maintaining the optimum
current assets and liquid assets according to standard norms.
 The quantum of the sales generated should be improved impressively in order
to attain higher return on investment. To improve the financial health of the
bank and maximizing the time between the source mobilization and utilization
the management must introduce the new cost saving techniques.

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 CONCLUSION:
a) The study reveals gradual increase and decrease in total cash inflows and outflows.
b) This shows an irregular pattern of cash inflows and outflows. It also reveals that
bank has been able to maintain sufficient cash balances.
c) The bank should invest more, to decrease the borrowings and get a free flow of the
money. d)The share capital received was also decreasing at the decreasing rate
through all the five year 2013, 2014, 2015, 2016,2017 i.e., 821.74crores, 44.62crores,
98.54crores ,32.77crores and 33.23crores respectively.
e) Profits are increasing yearly which shows good sign for the bank and after
comparing these years income earned with the expenditures if shows that income
earned is more than that if expenditure with showed profitability of the bank, and
there is an increase in the profits because of the trust the customers have on the bank
and the Services provided by the bank in timely manner.
f) Mahesh Bank performance is on moderate level. Hence it is concluded that bank
has to take necessary Steps and measures in order to control the activities of the bank
and put the organization in a better position.

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 BIBLIOGRAPHY

I. TEXT BOOKS
 Financial Management Written By M.Y. Khan & P.K Jain.
 Financial Management Written By I M Panday.
 Financial Management Written By Prasanna Chandra.
 Agrawal, N.P (1983) Analysis of Financial Statements, National Publishing
House.

II. WEB SITES

 www.maheshbank.com
 www.slideshare.net
 Www. Investopedia,com

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