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CASH FLOW STATEMENT

ATUL ADITYA

Introduction to the Topic

The topic given to me was to visit a manufacturing firm and collect its profit and loss account and balance sheet for the two years and on that basis prepare a cash flow statement.

Profit and Loss Account

The Profit and loss account is generally prepared to determine the profit and loss made by an organization during a particular period. While preparing this account the following points must be kept in mind :

All expenses are debited to the Profit and loss account All incomes are credited to the Profit and loss account In addition certain adjustments are also treated given in the trial balance

Balance Sheet
A Balance Sheet is a statement of assets and liabilities of a business organization at any particular date. At the end of each accounting period, every business organization prepares a Balance Sheet to have a clear understanding of its assets and liabilities which indicate the financial position of the concern

Cash Flow Statement (AS-3 revised)

Cash flow statement comes under the accounting standard 3. The following concepts are important to understand before preparing the cash flow statement: Cash : The general view of the term cash or cash equivalents are short term highly liquid investments that are readily convertible into cash with no or negligible loss such as Government Bonds The second concept is that of the working capital , which is mathematically illustrated as current assets current liabilities

Uses OF Cash Flow Statement

Ability to generate cash flows : The cash flow statement makes it possible to predict the amounts, timing and uncertainty of future cash flows on the basis of what has happened in the past. Ability to pay dividends and meet commitments : A cash flow statement indicates the sources and uses of cash under suitable headings such as operating, investing and financing activities respectively. Reasons for the difference between proit and loss and net cash flow from operating activities : The figure of net profit is important since it provides information about the success and failure of a business fro time to time . Investing and financing transactions during the period : By analysing the companys investing activities the users of financial statements can judge why assets and liabilities increased or decreased during the period covered.

Components of Cash Flow

CASH FLOW STATEMENT

OPERATING ACTIVITIES

INVESTING ACTIVITIES

FINANCING ACTIVITIES

Objective of study

Primary Purpose : A primary purpose and objective of cash flow statement is to provide information about the cash receipts and cash payments of a business entity for the accounting period covered by the income statement. Secondary purpose : The secondary purpose or objective of the Cash Flow statement is to provide information about the business entitys operating, investing and financing activities during the accounting period.

Methodology

Data collection
The company used for this study is Dabur Nepal Private Ltd, and most of the information is based on the data obtained from the companys annual report. Also in addition various books and articles have been referred for this study in order to correctly judge the financial position of the enterprise and also to prepare the Cash Flow statement. The Profit and loss account and Balance sheet as provided in this report is an extract from the Annual Report of Dabur Nepal Private Ltd. Also mentioned in the Report are the names of the chief operating officers in the management

Introduction to Dabur

Dedicated to Nature The guiding force behind Dabur's growth and success has been the wealth of nature and its limitless capacity to support life,

Dabur Nepal Private Limited was set up as an independent Group company in 1992. This new company, set amidst the verdant greens and towering mountains of the Himalayan kingdom of Nepal, has established a unique bond of technology and preservation.

CASH FLOW STATEMENT (Indirect method)

PARTICULARS In lacs Date In lacs Date

Cash flow from operating activities Net profit as per P&L account Add: Depreciation Amortization of Deferred expense Interest Fixed assets written off Loss on sale of assets Loss on sale of Bonds 1065.95 16.42 809.47 91.77 10.74 120.48

31-Mar-04 1841.53

31-Mar-05 1381.21

1014.31 15.1 553.85 91.77

2114.83

1675.03

Less: Profit on sale of fixed assets Interest received Rent received Operating profit before working capital changes Working capital changes Increase/Decrease in inventories Increase /Decrease in debtors Increase/Decrease in Loans and advances Increase/Decrease in Deposits and receivable Decrease /Increase in Liabilities Decrease /Increase in Provisions Increase In working capital 618.69 398.56 178.58 723.17 2425.27 78.02 4056.13 1779.19 57.83 136.11 1239.28 892.56 145.19 419.56 11.28 1.82 13.1 3943.26 12.75 8.09 2.93 23.77 3032.47

Cash generated from operation Interest paid advance tax paid Income tax adjusted for previous years Cash Generated from Operating activities Cash Flow from Investing activities Purchase of fixed assets Deferred Revenue expenses Purchase of Investments Sale of fixed assets Sale of investments Rent received Cash Generated from Investing activities

8008.39 -1002.48 -306.74 -9.52 6689.65

3452.03 -516.87 -417.96 -41.92 2475.28

- 1032.10 -75.56

-2,329.58

19.3 460.98 419.78 1.82 -225.28 2.93 -2,296.72 49.23

Cash Flow from Financing activities Payment of working capital loans Repayment of term loans to banks Repayment of unsecured loans to banks Deferred Financing from supplier Payment of dividend Tax on dividend Interest received Cash flow from Financing activities Net increase in cash flow Opening cash and bank balance Closing cash and bank balance -1373.42 -607.88 -4000 -49.36 -364.23 -19.01 11.28 -6402.62 61.75 30.03 91.78 -8.26 -242.64 -12.77 8.09 -257.64 -79.08 91.78 12.7 -2.06

Research Findings

In this case of Dabur Nepal private ltd. The Net profit for the previous year 2004 was 1841.53 lacs as compared to the current year 2005 1381.21lacs , so there has been a decline in the net profits of the company to the extend of 460.32 lacs . Also the depreciation amount has been provided on the assets @ 5% approx. There has been a loss of assets and on bonds in the previous year amounting to 131.22 lacs. In the area of working capital there is a considerable decrease in the amount if compared to the previous year.

The turnover of the company has increased by 4.69% over the previous year. The Net Profit after tax has reduced by 2.28% over the previous year due to lower contribution margin.

During the year the company has invested Rs 24.65 crore on account of fixed assets. Out of which, major amount is spent towards installing a new packing machine in Juice Plant in Flex Pack and increasing cold store capacity. The company has disposed off its fixed assets amounting Rs 4.51 crore during the year.

The reason for the low profits this year has been mainly due to purchase of fixed assets as the company is taking drastic steps towards modernizing and diversification necessary equipment is needed. There are been an allocation of 1297.48 lacs for this purpose.

Conclusion

To conclude it can be said that the financial position of the company is sound though the net profits have decreased but the shareholders have not been affected strongly by this , the company has taken positive steps towards modernization and expansion

Bibliography

Dabur Nepal Private Ltd Corporate Accounting J.R.Monga