funds flow statement project
TRANSCRIPT
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Chapter I
INTRODUCTION
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Introduction
Financial Managementis the specific area of finance dealing with the financial
decision corporations make, and the tools and analysis used to make the decisions. The
discipline as a whole may be divided between long-term and short-term decisions and
techniques. Both share the same goal of enhancing firm value by ensuring that return on
capital exceeds cost of capital, without taking excessive financial risks.
Capital investment decisions comprise the long-term choices about which
projects receive investment, whether to finance that investment with equity or debt, and
when or whether to pay dividends to shareholders. hort-term corporate finance decisions
are called working capital managementand deal with balance of current assets and
current liabilities by managing cash, inventories, and short-term borrowings and lending
!e.g., the credit terms extended to customers".
#orporate finance is closely related to managerial finance, which is slightly
broader in scope, describing the financial techniques available to all forms of business
enterprise, corporate or not.
Role of Financial Managers$
The role of a financial manager can be discussed under the following heads$
%. &ature of work
'. (orking conditions
). *mployment
+. Training, ther qualifications and dvancement
. /ob outlook
0. *arnings
1. 2elated occupations
3et us discuss each of these in a detailed manner.
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%. Nature of work
lmost every firm, government agency and organi4ation has one or more
financial managers who oversee the preparation of financial reports, direct investment
activities, and implement cash management strategies. s computers are increasingly
used to record and organi4e data, many financial managers are spending more time
developing strategies and implementing the long-term goals of their organi4ation.
The duties of financial managers vary with their specific titles, which
include controller, treasurer or finance officer, credit manager, cash manager, and risk
and insurance manager. Controllers direct the preparation of financial reports that
summari4e and forecast the organi4ation5s financial position, such as income statements,
balance sheets, and analyses of future earnings or expenses. 2egulatory authorities also in
charge of preparing special reports require controllers. ften, controllers oversee the
accounting, audit, and budget departments. Treasurers andfinance officers direct the
organi4ation5s financial goals, objectives, and budgets. They oversee the investment of
funds and manage associated risks, supervise cash management activities, execute
capital-raising strategies to support a firm5s expansion, and deal with mergers and
acquisitions. Credit managers oversee the firm5s issuance of credit. They establish
credit-rating criteria, determine credit ceilings, and monitor the collections of past-due
accounts. 6anagers speciali4ing in international finance develop financial and accounting
systems for the banking transactions of multinational organi4ations.
Cash managers monitor and control the flow of cash receipts and
disbursements to meet the business and investment needs of the firm. 7or example, cash
flow projections are needed to determine whether loans must be obtained to meet cash
requirements or whether surplus cash should be invested in interest-bearing instruments.
Risk andinsurance managersoversee programs to minimi4e risks and losses that might
arise from financial transactions and business operations undertaken by the institution.
They also manage the organi4ation5s insurance budget.
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7inancial institutions, such as commercial banks, savings and loan associations, credit
unions, and mortgage and finance companies, as lending, trusts, mortgages, and
investments, or programs, including sales, operations, or electronic financial services.
These managers may be required to solicit business, authori4e loans, and direct the
investment of funds, always adhering to tate laws and regulations.
Branch managers of financial institutions administer and manage all of the
functions of a branch office, which may include hiring personnel, approving loans and
lines of credit, establishing a rapport with the community to attract business, and assisting
customers with account problems. 7inancial managers who work for financial institutions
must keep abreast of the rapidly growing array of financial services and products.
8n addition to the general duties described above, all financial managers
perform tasks unique to their organi4ation or industry. 7or example, government financial
managers must be experts on the government appropriations and budgeting processes,
whereas healthcare financial managers must be knowledgeable about issues surrounding
healthcare financing. 6oreover, financial managers must be aware of special tax laws
and regulations that affect their industry.
7inancial managers play an increasingly important role in mergers and
consolidations and in global expansion and related financing. These areas require
extensive, speciali4ed knowledge on the part of the financial manager to reduce risks and
maximi4e profit. 7inancial managers increasingly are hired on a temporary basis to
advise senior managers on these and other matters. 8n fact, some small firms contract out
all accounting and financial functions to
The role of the financial manager, particularly in business, is changing in
response to technological advances that have significantly reduced the amount of time it
takes to produce financial reports. 7inancial managers now perform more data analysis
and use it to offer senior managers ideas on how to maximi4e profits. They often work on
teams, acting as business advisors to top management. 7inancial managers need to keep
abreast of the latest computer technology in order to increase the efficiency of their firm5s
financial operations.
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2. Working conditions
7inancial managers work in comfortable offices, often close to top
managers and to departments that develop the financial data these managers need. They
typically have direct access to state-of-the-art computer systems and information
services. 7inancial managers commonly work long hours, often up to 9 or 09 per week.
They generally are required to attend meetings of financial and economic associations
and may travel to visit subsidiary firms or to meet customers.
3. Emploment
(hile the vast majority is employed in private industry, nearly % in %9
works for the different branches of government. 8n addition, although they can be found
in every industry, approximately % out of + are employed by insurance and finance
establishments, such as banks, savings institutions, finance companies, credit unions, and
+. !raining" #t$er %ualifications and &dvancement
bachelor5s degree in finance, accounting, economics, or business
administration is the minimum academic preparation for financial managers. :owever,
many employers now seek graduates with a master5s degree, preferably in business
administration, economics, finance, or risk management. These academic programs
develop analytical skills and provide knowledge of the latest financial analysis methods
and technology.
*xperience may be more important than formal education for some
financial manager positions;notably, branch managers in banks. Banks typically fill
branch manager positions by promoting experienced loan officers and other professionals
who excel at their jobs. ther financial managers may enter the profession through
formal management training programs offered by the company.
#ontinuing education is vital for financial managers, who must cope with the growing
complexity of global trade, changes in tate laws and regulations, and the proliferation of
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new and complex financial instruments. 7irms often provide opportunities for workers to
broaden their knowledge and skills by encouraging employees to take graduate courses at
colleges and universities or attend conferences related to their specialty. 7inancial
management, banking, and credit union associations, often in cooperation with colleges
and universities, sponsor numerous national and local training programs.
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?=
@ice president of finance )01,999
Treasurer )9%,'99
ssistant vice president-finance '>',099
#ontrollerAcomptroller '0>,099
irector ''1,'99
ssistant treasurer ''),>99
ssistant controllerAcomptroller ')%,999
6anager %01,999
#ash manager %'C,+99
3arge organi4ations often pay more than small ones, and salary levels also
can depend on the type of industry and location. 6anagers in both public and private
industry receive additional compensation in the form of bonuses, which also vary
substantially by si4e of firm. eferred compensation in the form of stock options is
becoming more common, especially for senior level executives.
+. Related occupations
7inancial managers combine formal education with experience in one or
more areas of finance, such as asset management, lending, credit operations, securities
investment, or insurance risk and loss control. (orkers in other occupations requiring
similar training and skills include accountants and auditorsD budget analystsD financialanalysts and personal financial advisorsD insurance underwritersD loan counselors and
officersD securities, commodities, and financial services sales agentsD and real estate
brokers and sales agents.
Need For Study
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The study has great significance and provides benefits to various parties whom
directly or indirectly interact with the company.
8t is beneficial to management of the company by providing crystal clear picture
regarding important aspects like liquidity, leverage, activity and profitability
The study is also beneficial to employees and offers motivation by showing how
actively they are contributing for company5s growth.
The investors who are interested in investing in the company5s shares will also
get benefited by going through the study and easily take a decision whether to
invest or not invest in the company5s shares.
Objectives of the Study
To study the financial soundness of Eenting 3anco !8ndia"
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Chapter II
THEELECTRICITYREGULATORY
COMMISSIONANALYSIS
(SUBSTANTIVEISSUESRAISEDBYTHE
PUBLIC)
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ndhra
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Regulation No. 1 of 2007
!R&N/MI//I#N 0ICEN/EE /!&N-&R-/ #F ,ERF#RM&NCE
8n exercise of the powers conferred by sections %>% read with section 1
!%", 1 !'" and >0 !%" !i" of the *lectricity ct, '99) !)0 of '99)", the ndhra
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transmission services from the licensee, and persons who have applied for availing
transmission services from a transmission licensee.
!f" G*:@A*:TH means *xtra :igh @oltageA*xtra :igh Tension !voltage levelabove )),999 volts"D
!g" GErid #odeH means the set of principles and guidelines prepared in accordance
with the terms of ection >0 !%" !h" of the *lectricity ct '99)D
!h" G8*E#H means the 8ndian *lectricity Erid #ode approved by #entral *lectricity
2egulatory #ommission !#*2#" and Erid #ode specified by #entral #ommission under
clause !h" of sub-section !%" of section 1C of the ctD
!i" G
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3. O!"ECTI#E
This 2egulation lays down the performance standards to maintain certain
critical grid parameters within the permissible limits. These standards shall serve as
guidelines for tate Transmission ?tility !T?"ATransmission 3icensee to operate the
8ntra-tate Transmission ystem for providing an efficient, reliable, coordinated and
economical system of electricity supply and transmission. The main objectives of these
performance standards are$
!a". To ensure that the grid performance meets minimum standards essential for
the ?sers5 system demand and proper functioning of equipmentD
!b". To enable the ?sers to design their systems and equipment to suit the
electrical environment that they operate inD and
!c". To enhance the quality standards of the tate Transmission ystem in order
to move towards standards stipulated in or established under the authority of &ational and
tate cts and 2ules in the short term and gradually towards the international standards
in the long term.
.STANDARDS O $ERORMANCE
.1 The Transmission performance standards are classified under the following two
categories$
!a" 6andatory tandards - Those performance standards, the failure to maintain
which attracts the provisions of sub-section !'" of the section 1.
!b" esirable tandards - Those performance standards, which are desirable for
providing quality, continuity and reliability of services by the 3icensees, and though also
specified by the #ommission do not, unless provided otherwise by the #ommission from
time to time, attract the provisions of sub-section !'" of the section 1.
.2 !$efollowing standards are the mandatory standards$
!a" @oltage @ariation
!b" afety tandards
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These are statutory standards to be complied with by the 3icensee as per
*lectricity 2ules %C0 wherever not inconsistent with the ct. The new 2ules under
section ) of ct are yet to be issued by the #* in consultation with the tate
Eovernment. The standards specified in this 2egulation shall therefore be revised after
new 2ules under the ct come into effect.
.3 esirable standards too have been specified herein under section >0 !%" !i" of the ct,
with the main objective of providing quality, continuity and reliability of services to the
consumers. The #ommission shall fix the time-bound schedule for
implementationAcompliance ofAwith each parameter of these standards. The following
standards are specified herein as desirable of achievement$
!a" 7eeder vailability
!b" ub-station vailability
!c" @oltage ?nbalance
!d" &eutral @oltage isplacement !&@"
!e" @oltage @ariation 8ndex !@@8"
!f" ystem dequacy
!g" ystem ecurity
'.$HASIN% O IM$LEMENTATION
'.1 The performance standards excepting the 6andatory tandards, specified herein shall
be implemented in a phased manner in three stages as follows$
!a"
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licensee is expected to upgrade its systems. tandards marked as 3evel ' shall be
achieved during Transition tage, unless specified otherwise.
!c" 7inal tage !3evel-)"$ Two years after expiry of the Transition tage whensubstantial improvements should have been carried out and the system considered to be
in satisfactory condition with necessary capability improvement. tandards marked as
3evel ) shall be achieved during this 7inal tage.
'.2 8n all cases, where standards are specified by appropriate authorities, for example
*lectricity 2ules %C0, such standards shall be required to be complied with as specified
by that authority, may be from the preliminary stage itself.
/tandards to )e complied wit$
'.3 The #ommission specifies the following standards for T?ATransmission 3icensees$
a4 5oltage 5ariation
!i" @oltage @ariation is defined as the deviation of the root-mean-square !26"
value of the voltage from its nominal 26 value, expressed in terms of percentage.
@oltage @ariation may be either of short duration not exceeding one minute or of long
duration for a time greater than one minute.
!ii" 7or the purpose of these standards, the sustained variation in steady state
voltage exceeding one minute duration shall be considered. The specified permissible
limits of sustained voltage variation shall not apply in the cases where the circumstances
are reasonably beyond the control of tate Transmission ?tility ATransmission 3icensee
e.g. major break-downs, grid failures, accidents, system distress conditions, etc.
!iii" tate Transmission ?tility ATransmission 3icensee shall make all possible
efforts to ensure that the grid voltages remain within the following voltage levels at all
points of its Transmission ystem$
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Nominal 5oltage
k54
Ma6imum 5alue
k54
Minimum 5alue
k54
+99 +'9 )09
''9 '+ '99
%)' %+ %'9
)) ) )9
%%I %%.01 %9
& ''k# (oltages to )e maintained )* the transmission licensee onl* inthose cases +here ''k# su,,l* is e-tended from the EHT su)station.
)4 /afet /tandards
!i" tate Transmission ?tility ATransmission 3icensee shall observe the general
safety requirements as laid down in 8* 2ules, %C0, for construction, installation,
protection, operation and maintenance of electric supply lines and apparatus.
!ii" 2elevant rules under 8* 2ules, %C0 pertaining to safety standards and
practices shall be followed.
!iii" tate Transmission ?tility A Transmission 3icensee shall develop its own
peration and 6aintenance 6anual !including afety 2egulations
!iv" tate Transmission ?tility A Transmission 3icensee shall develop its own
peration and 6aintenance 6anual !including afety 2egulations" #lause !c" of section1) read with ection ) of the ct.
c4 Feeder &vaila)ilit
!i" The feeder availability gives the percentage of time during which the
feeder remained available for transmission. 7eeder vailability shall be calculated based
on following formula
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!ii" ubject to istribution 3icensee!s" observing the Erid #ode
#onnection #onditions in this regard, the voltage unbalance shall not exceed the values
given below$
Implementation /tage 5oltage 0evel 0imit of
voltage
un)alance
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neutral to ground. The neutral therefore shifts from earth potential. This performance
standard shall be achieved for star point of all *:T transformers having ))k@ or %%k@
on the low voltage side.
!ii" ?nbalance voltages and displacement of neutral result in decreased efficiency,
negative torque, leakage currents, vibrations and overheating. evere unbalance and
neutral displacement could lead to malfunctioning of some equipment.
!iii" The tate Transmission ?tility ATransmission 3icensee shall ensure that the
neutral point voltage of the transformers with respect to earth will not have potential
greater than 'J of the no load phase to phase voltage of the transformer.
!iv" This standard shall be implemented in the
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Transition tage S 3evel ' K 0 to be achieved for more than C9J of buses
7inal tage S 3evel ) K + to be achieved for more than C9J of buses
$4 /stem &de%uac
ystem adequacy is the ability of the electric system to receive the
generated power or supply the aggregate electrical demand and energy requirements of its
consumers at all times, taking into account scheduled and reasonably expected
unscheduled outage of system elements. dequacy of the power system is usually
measured in terms of 3oss of 3oad 1.09 %J
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i4 /stem /ecurit
ecurity is the ability of the electric system to withstand sudden
disturbance such as electric short circuit or unanticipated loss of system element, detailed
in #lause 0 of G6anual on Transmission
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period. The tate Transmission ?tility ATransmission 3icensee shall maintain the base
data like 3og heet, #omplaint 2egisters and 8nterruption 2egister and relevant load flow
studies in respect of system security etc. at sub-station level for compilation of monthly
report at circle level. The consolidated report shall be based on circle-wise compilation
for whole tate Transmission ?tility ATransmission 3icensee. The circle-wise
compilation and base data at sub-station level shall be subject to its scrutiny as considered
necessary by the #ommission.
*.2 The tate Transmission ?tility ATransmission 3icensee shall display on their website
the actual performance against the required standards on a monthly basis.
*.3 7or the purpose of this 2egulation, the half-year periods would be as follows$
!a" %st:alf year$ %stpril to )9theptember
!b" 'nd:alf year$ %stctober to 6arch )%st.
*. The #ommission may, from time to time, modify the contents of the
regulationAformats or add new regulationAformats for additional information.
*.'8n addition to the hard copies, the information shall necessarily be submitted in such
electronic form or through compact disks or e-mail as the #ommission may direct.
*.* Effectof default in compliance with the tandards
!a" #onsequent to failure of tate Transmission ?tility ATransmission 3icensee to
meet performance standards specified herein, the affected ?tilityA#onsumers shall be
entitled to seek reliefAcompensation from tate Transmission ?tility ATransmission
3icensee, as may be determined by the #ommission$
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!b" The #ommission at its own discretion may require the tate Transmission
?tility ATransmission 3icensee to furnish a report on actual performance levels
maintained against the standards specified by the #ommission with its
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provisions of this 2egulation, if the #ommission, in view of the special circumstances of
a matter or class of matters and for reasons to be recorded in writing, deems it necessary
or expedient for dealing with such a matter or class of matters.
+.*&othing stated in this 2egulation shall, expressly or implicitly, bar the #ommission
from dealing with any matter or exercising any power under the ct for which no
2egulation has been framed, and the #ommission may deal with such matters, powers
and functions in a manner it thinks fit.
E6emption
+.+ The #ommission may relax adherence to specific performance standard during 7orce
6ajeure conditions such as war, mutiny, civil commotion, riot, flood, cyclone, storm,
lightening, earthquake, grid failure, and strikeAcurfew, lockout, fire affecting the tate
Transmission ?tility5sA Transmission 3icenseeFs installations and operation activities.
+.: The #ommission under specific circumstances may also relax any provisions of
2egulation in general or in specific cases for the period!s" specified in its order!s".
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Cha,ter 0 III
,#WERIN->/!RG
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IN->/!RG ,R#FI0E
*3*#T28#8TM is one of the vital requirements in the over all
development of the economy and is therefore, appropriately called the HW$eel of
-evelopment. 8n fact, the power sector has played a dominant role in the socio-
economic development of the county. s a convenient versatile and relatively cheap form
of energy it plays a crucial role in agriculture, transport, industry and domestic sector.
:ence power has all along remained in the priority list of 8ndian planners and plan
outlays have reflected this aspect. The outlays for power sector have been around %CJ of
the total outlays for the public sector in various plan periods.
There has been a spectacular increase in the installed generating capacity
of electricity in the country. tarting with a capacity of about %)096( at the time of
independence,
espite tremendous increase in the availability of power since
independence there is acute power shortage gap between demand and supply. The per
capita consumption of power in the country is very low as compared to the position in the
developed countries.
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$O1ER SCENARIO
The power sector is at cross roads today. There is a chronic power
shortage in the country mainly attributable to demand of power continuously outstripping
the supply.
H2DEL $O1ER
8n the present global energy context, there are certain aspects, which have
acquired a new significance. The development of hydropower has to be given a major
thrust in the current decade. (e still have large untapped hydro power potential, but its
development has slowed down on account of lack of financial resources, interstate
rivalry, inefficiency of certain state electricity boards, variations in the course of the
monsoons etc. a concerted effort is imperative to overcome the hurdles and enlarge the
share of the hydro power generation in the country. This will help not only in tapping a
renewable resource of energy, but will provide essentially needed peaking support to
thermal power generation with the pattern of demand for electricity. ince the planners5
initial enthusiasm about the large hydel projects has waned somewhat, 8ndia will do well
to take resource to the #hinese pattern of micro and mini hydel projects wherever the
terrain is suitable.
The &ational :ydroelectric 0J in
%C00 to about '>J by 6arch %CC'. 6any of the problems in the power supply and power
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system in the country can be attributed inter alia to the declining hydro share in the power
system and consequent growth of thermal development in the sub-optimal manner.
Eovernment of 8ndia has recently constituted a group to identify newhydel projects on which advance action can be taken. 8n order to give a boost to the
development of hydro power more and more hydro electric projects are being planned or
being implemented in the central sector. 8n order to achieve this four #orporations have
already been set up under #entral or in joint sectors.
They are
%. &ational :ydroelectric
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MINI
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Eeo degrees #entigrade i.e. C-0 degrees 7ahrenheit.
This thermal energy does not change with respect to the outside temperature
considerably. The only change visible is very small which also has a time lag with respect
to outside temperature. The temperatures beneath the ground are rather cool !% degrees
#" when in summer and warm enough !%> degrees #" during winter. This provides the
feed for the natural air conditioning system.
Jeo ,ower /stem #peration
E*
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The systems usage of natural resources to effectively control the temperature
and ventilate at all hours, successfully creating a better, healthier and comfortable
living space.
3. ,rotects t$e Goung and t$e #ld
8n this age where child care and better health services for allespeciallyof the old have taken primary significance, the power of thissystem which minimi4estemperature differences between interior rooms helps better health keeping for the young
and the old.
. Natural ,urification
The system includes natural purification of minute impurities in the air
which are cleaned before being pumped into the house. This is done with the help of
condensed moisture which accumulates at the surface of the cobblestones and the pipes.
'. =umidit control and Jerm ,revention
?sing &atural ehumidifiers and health care material like tourmaline,
charcoal and copper the humidity is controlled and also help in germ prevention.
LEcosstem and Environment
1. Energ /aving
The most scarce resource in the world is the forms of energy availabletomankind. (ith ever increasing dependence on electricity as a mediumof energy, theinvention of alternative energy resources is a tough ask. The usage of alternative energy
form by this system greatly helps in reducing the usage of conventional electricity for air
conditioning and also helps in reducing the emission of harmful #' into the
environment.
2. =eat Island ,$enomenon Reduced
2eduction in the usage of electric air conditioning systems helps in thereduction of the heat island phenomenon.
L!uilding Structure
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1. Increased -ura)ilit
The durability of the building both exteriors and interiors is increased by
the prevention of mould and dewfall. The corrosion of the building mostly due to water
reasons and humidity is avoided by using dehumidifier5s namely ceramic charcoal and
others. This helps to maintain the good condition of the building.
2. 0ow Cost and Maintenance Friendl
ince the system is made up of several small independent units, the
maintenance is simple and the costs for the same are low.
N>C0E&R ENERJG
The planners, right from the beginning understood the importance of
nuclear energy in meeting the country5s long-term energy needs. 2ecogni4ing that
nuclear technology would be subject to a progressively restrictive technology central
regime and also that the long term strategies for exploitation of the country5s vast
thorium resources are bound to be some what different from those of most other countries
engaged in nuclear power development, tremendous emphasis was placed on achieving
self reliance in technology development. This policy has yielded rich dividends and today
one can proudly use the reali4ation of indigenous capability in all aspects of the nuclear
fuel cycle.
%. Tarapur tomic
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(ind energy is fast emerging as the most cost-effective source of power
as it combines the abundance of a natural element with modern technology. The growing
interest in wind power technology can be attributed not only to its cost effectiveness but
also to other attractive features like modularity, short project gestation and the non-
polluting nature of the technology. 8n 8ndia, the exercise to harness wing energy includes
wind pumps, wind battery chargers, stand alone wind electric generators and grid
connected wind farms. The department of non-conventional energy sources !&*" in
association with state agencies has been responsible for creating and sustaining interest in
the field.
/#0&R ENERJG
8t is believed that with just 9.% per cent of the 1,999 trillion k:4 of solar
energy that reaches the earth, planet5s energy requirement can be satisfied. *lectricity can
be generated with the help of solar energy through the solar thermal route, as well as
directly from sunlight with the help of olar
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The power sector in 8ndia is beset with a number of problems. They relate
to delays in the formulation and implementation of various projects, poor utili4ation of
capacity, bottlenecks in the supply of coal to thermal station, and its poor quality, faulty
distribution and transmission arrangements and bad planning leading to an injudicious
hydel thermal mix. *cological problems are also vexing this sector.
:urdles in environmental clearances tend to slow down completion of
power projects. #ompensatory afforestation and land acquisition have proved to be major
bottlenecks in the clearance of power projects. The main problem faced in the case of
environmental clearances is the shortage of land for compensatory afforestation. (hile
project authorities are prepared to invest funds in afforestation land, the state
governments are not able to provide the required land. The Eovernment has proposed to
set up a task force to look into clearances for power projects and speed up the clearances.
SHORT AND LON% TERM MEAS/RES TO CO$E 1ITH THE
ENER%2 SHORTA%ES3
/$ort term /trateg
%. The increased number of short gestation gas based projects to add capacity and
stabili4e power supply.
'.
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0. *ffective interconnected operation of power systems in the various regions to enable
transfer of power from surplus to deficit systems and also ensuring delivery of power
from #entral sector power plants to beneficiary states.
0ong term strateg
%. cceleration of hydro development by focusing on removing the various
inadequacies in organi4ation. 6anagement funding etc. it would be desirable and
necessary to make provision of adequate funds especially earmarks for hydro
development.
'. Tlomg 8 a larger T P
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%. '9J equity out of which at least %%J to be raised as promoter5s contribution
'. >9J of the capital investment to be raised through loans and only 9J of this amount
could be raised from public 7alls.
). ebt equity ratio has been raised up to +$%
+. 8ncrease in the prescribed rate of return for the license has been approved from the
existing %'J to %J.
. #apitali4ation of interest during construction has been permitted at the actual cost
!instead of the present %J above the 2eserve Bank rate" for the initial project as well
as for the subsequent expansions.
0. RE
Eovernment5s decision to invite the private sector to participate in the
power generation sector is most opportune and constructive approach
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Cha,ter 0 I#
O#ER#IE1O
0&NC#JR#>,
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,R#FI0E#FJEN!INJ0&NC#,#WERIN-I&4
,RI5&!E0IMI!E-
O$ERATIONS4 MAINTENANCECOM$AN2ORLANCO
5ONDA$ALLI$O1ER$RI#ATELIMITED4
Eenting 3anco
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0&NC#JR#>,,R#FI0E
3 Eroup, headquartered in :yderabad, 8ndia is one of the leading
business houses in outh 8ndia. 8t has an asset base of ? = +9 million and a turnover of
more than ? = )99 million. (ith operational experience in power plants based on Eas,
Biomass and (ind and an operating capacity of 9C 6(, 3 is heading for a
capacity of '99 6( and an asset base of ? = '. billion by the year '9%9.
3anco is a well-diversified group with activities like power generation,
engineering and construction, manufacturing, 8nformation technology !8T", and property
development. 3anco group is striving to *mpower, *nable and *nrich partner, business
associates and to be the chosen vehicle for growth for stakeholders and source of
inspiration to the society. The group is recogni4ed as a leading player in the 8ndian
economic scenario with operation in ? and ?W. 3 also has presence in #ivil
#onstruction,
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MEMER #F ,&R0I&MEN!
fter one-and-a-half decades of outstanding contribution to the industry,
2ajagopal chose to enter public life in '99). :e contested the recent elections to the
3ower :ouse of
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$t %an&o di'erse dimension of gro(th is a&hie'ed through
&on'erging rays of 'ision &reating dimensions6
W3:T8 #T8&E limited an example of the forward integration
of the company established in %CC1 located strategically beside the
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1. To work with honest purpose, strategic planning and enduring perseverance to
achieve customer satisfaction, stakeholder benefits and measurable economic
growth for the organi4ation.
$hiloso,h*
%. ssemble best people, delegate authority and don5t interfere Gpeople make the
difference
'. Business heads are entrepreneurs
). 6istakes are facts of life. 8t is response to the error that counts.
Success
%. #reate your luck by hard work
'. Trust R delegation K growth.
1ork culture
%. #ommitment, creativity, efficiency, team spirit.
,R#M#!ER/ &N- EO>I!G ,&R!NER/
The power project is promoted by 3anco group of 8ndia and is co-promoted by
%. Eenting Eroup of 6alaysia
'. !##" common wealth development corporation ?W
). !oosan" oosan heavy industries and construction co.ltd in Worea.
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Fuel Received
&aphtha fuel - Through dedicated pipeline from :
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+. #ontinual improvement in the environmental performance by minimi4ing the
emission and discharges P prevention of pollution.
. *nhancing environmental awareness among employee5s contractors and surroundingsociety.
O>&0I!G ,#0ICG
(e are committed to continually improve the quality of our performance
through the application of our Xuality policy.
%. ?tili4ing #ommercial, *ngineering and :uman 2esources, to 6inimi4e 2isks to
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0K,,0/ C#MMI!MEN! !# C0E&N P /&FE EN5IR#NMEN!
7%reen )elt Management8
3anco #ommitment to re vegetation is
%. *ncourage native fauna to develop.
'. #ontribute to a reduction in green house gases
). 2educe noise level
+. 6inimi4e the effect of soil erosion.
. :elp to restore the site to a sustainable system.
0. 8mprove as the aspects of the power plant.
n going trees planting and maintaining theme are the important aspects of
environmental management program at 3.
N#I/E M&N&JEMEN!
*fforts to minimi4e noise emission from equipment and activities.
%. coustic linings around gas and steam turbines and boilers.
'. ilencers have been provided.
). &oise minimi4ation policy for equipment.
EFF0>EN! -I/C=&RJE- FR#M ,#WER ,0&N!
(ell-developed chemical laboratory to cater the need for monitoring
effluent quality as per
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C#M,&NG =IJ= 0IJ=!/
%. )0>.%++ 6( combined cycle power plant under build S operate S own arrangement
with the state government.
'. The single largest investment in ndhra . The first private sector power project to receive disbursement of finance from
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Chapter-V
FUNDS FL W STATEMENT
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Funds Flow /tatement
Introduction
The basic financial statements i.e., the balance sheet and profit and loss
account or income statement of business, reveal the net effect of various transactions on
the operational and financial position of the company. The balance sheet gives a
summary of the assets and liabilities of an undertaking at a particular point of time. 8t
reveals the financial states of the company. The assets side of a balance sheet shows the
deployment of resources of an undertaking while the liabilities side indicates its
obligations i.e., the manner in which these resources were obtained. The profit and loss
account reflects the results of the business operations for a period of time. 8t contains a
summary of expenses incurred and the revenue reali4ed in an accounting period and the
revenue reali4ed in an accounting period. Both the statement provides the essential basic
information on the financial activities of a business but their usefulness is limited for
analysis and planning purposes. The balance sheet gives a static view of the resources
!liabilities" of a business and the uses !assets" to which these resources have been put at a
certain point of time. 8t does not disclose the causes for changes in the assets and
liabilities between two different points of time. The profit and loss account, in a general
way indicates the resources provided by operations. But there are many transactions that
take place in an undertaking and which do not operate through profit and loss account.
Thus another statement has to be prepared to show the change in the assets and liabilities
from the end of one period of time to the end of another period of time. The statement is
called a statement of changes in financial position or a funds flow statement.
The 7unds 7low tatement is a statement, which shows the movement of
funds and is a report of the financial operations of the business undertaking. 8t indicates
various means by which funds were obtained during a particular period and the ways in
which these funds were employed. 8n simple words it is a statement of sources P
applications of funds.
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)eaning and &on&e*t of Funds
The term fund has been defined in a number of ways.
In a narrow sense
8t means cash only and a funds flow statement. uch a statement
enumerates net effects of the various business transactions on cash and takes into account
receipts and disbursements of cash.
In a broader sense
The term Qfunds5, refers to money values in whatever from it may exit.:ere Qfunds5 means all financial resources, used in business whether in the form of men,
material money, machinery and others.
In a Popular sense
The term Qfunds5, means working capital, i.e., the working capital concept
of funds has emerged due to the fact that total resources of a business are invested partly
in fixed assets in the form of fixed capital and partly kept in form of liquid or near liquid
form as working capital.
)eaning and &on&e*t of Flo( of funds
The term flow means movement and includes both inflow and out flow.
The term flow of funds means transfer of economic values from one asset of equity to
another flow of funds is said to have taken place when any transaction makes changes in
the amount of funds available before happening of the transaction. 8f the effect of
transaction results in the increase of funds it is called a source of funds and if it results in
the decrease of funds, it is known as an application of funds. 7urther, in case the
transaction does not change funds, it is said to have not resulted in the flow of funds.
ccording to the working capital concept of funds, the term flow of funds
refers to the movement of funds in the working capital. 8f any transaction results in the
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increase in working capital, it is said to be a source or flow of funds and if it results in the
decrease of working capital, it is said to be an application or out S flow of funds.
Rule
The flow of funds occurs when a transaction changes on the one hand a
non current account and on the other a current account and vice versa only. 8n simple
language funds move when a transactions effects
% a current asset and a fixed asset, or
' a fixed and a current liability or
) a current asset and a fixed liability or
+ a fixed liability and current liability
nd funds do not move when the transaction affects fixed assets and fixed
liability or current assets and current liabilities.
!urrent and Non+!urrent $&&ount
To understand flow of funds it is essential to classify various accounts and
balance sheet items into current and non-current categories
#urrent accounts can either be current assets or current liabilities. #urrent
assets are those assets which in ordinary course of business can be or will be
converted into cash within a short period of normally one accounting year.
#urrent liabilities are those liabilities which are intended to be paid in the
ordinary course of business with in a short period of normally one accounting year
out of the current assets or the income of the business.
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0ist of current or working capital accounts
Current 0ia)ilities Current &ssets
%. Bills payable %. #ash in hand.
'. undry creditors or accountspayable accrued or outstandingexpenses
'. #ash at bank.
). ividend payable Bank overdraft.
). Bills receivable.
+. hort-term loans advancesPdeposits.
+. undry debtors or accountsreceivable.
.
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0ist of non
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1. &nalses t$e transaction and find out t$e two accounts involved.
2. Make Dournal entr of t$e transaction.
3. -etermine w$et$er t$e accounts involved in t$e transaction are
current or non
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!$e funds flow statement descri)es t$e source from w$ic$
additional funds were derived and t$e use to w$ic$ t$ese coerces were
put.
-------&T:&M.
Funds flow statement as as a statement eit$er prospective
or retrospective setting out t$e sources and applications of t$e funds of
an enterprise. !$e purpose of t$e statement is to indicate clearl t$e
re%uirement of funds and $ow t$e are proposed to )e raised and t$eefficient utiliQation and application of t$e same
------- 8#(.8& E32M 7 6&E*6*&T ##?&T
Funds flow statement, income statement and balance sheet$
Funds flow statement is not a su)stitute of an income
statement" i.e." a profit P loss account and )alance s$eet.
& )alance s$eet is a statement of financial position or status
of a )usiness on a given date. It is prepared at t$e end of accounting
period. !$e )alance s$eet depicts various resources of an undertaking
and $e deploment of t$ese resources in various assets on a particular
date.
=ence" funds flow statement is not competitive )ut
complementar to financial statements. !$e funds statement provides
additional information as regards c$anges in working capital. It is a tool
of management for financial analsis and $elps in making decisions.
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-ifference )etween funds flow statement and income statement
Funds flow statement Income statement
%. 8t highlights the changes in the
financial position of a
business and indicates the
various means by which funds
were obtained during a
particular period and the waysto which these funds were
employed.
'. 8t is complementary to income
statement. 8ncome statement
helps the preparation of funds
flow statement.
). (hile preparing funds flow
statement both capital and
revenue item are considered.
+. There is no prescribed format
for preparing a fund flow
statement.
%. 8t does not reveal the inflow
and outflows of funds but
deposits the items of expenses
and income arrive at the figure
of profit or loss.
'. 8ncome statement is not
prepared from fund flow
statement.
). nly revenue item are
considered.
+. 8t is prepared prescribed
format.
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-ifference )etween funds flow statement P )alance s$eet
Funds flow statement alance s$eet%. 8t is a statement of changes in
financial position and hence is
dynamic in nature.
'. 8t shows the sources and uses
of funds in a particular period
of time.
). 8t is a tool of management for
financial analysis and helps in
making decisions.
+. ?sually, schedule of changes
in working has to be prepared
before preparing funds flow
statement.
%. 8t is a statement of
financial position on a
particular date and hence is
static in nature.
'. 8t depicts the assets and
liabilities at a particular point of
time.
). 8t is not of much help to
management in making
decisions.
+. &o such schedule of
changes in working capital is
required. 2ather profit P loss
account is prepared.
/ses9 significance and im,ortance of funds flo+ statement.
fund flow statement is an essential tool for the financial analysis and is of
primary importance to the financial management. The basic purpose of a funds flowstatement is to reveal the changes in the working capital on the two balance sheet dates. 8f
also describes the sources from which additional working capital has been financial and
the uses to which working capital has been applied. uch a statement is particularly
useful in assessing the growth of the firm. The significance or importance of funds flow
statement can be well followed from its various uses given below.
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1. It $elps in t$e analsis of financial operations
The financial statements reveal the net effect of various transactions on theoperational and financial position of a concern. The balance sheet gives a static view of
the resources of a business and the uses to which these resources of a business and the
uses to which have been put at a certain point of time. The funds flow statement explains
causes for such changes and also the effect of this change on the liquidity position of the
company sometime a concern may operate profitably and yet its cash position may
become more and worse. The funds flow statement gives a clear answer to such a
situation explaining what has happened.
2. It t$rows lig$t on man perple6ing %uestions of general interest
(hich otherwise may be difficult to be answered, such as
%. (hy were the net current assets lesser spite of higher profits and vice versaY
'. (hy more dividends could not be declared in spite of available profitsY
). :ow was it possible to distribute more dividends than the present earningsY
+. (hat happened to the proceeds of sale of fixed assets or issue of shares,
debentures, actY
. (hat happened to the net profitY (here did they goY
0. :ow was the increase in working capital financed and how will it be financed in
futureY
3. It $elps in t$e formation of a realistic dividend polic
ometimes a firm has sufficient profits available for distribution asdividend but yet it may not be advisable to distribute dividend for lack of liquid or cash
resources. 8n such cases, a funds flow statement helps in the formation of a realistic
dividend policy.
. It $elps in t$e proper allocation of resources
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The resources of a concern are always limited and it wants to make the
best use of these resources. projected funds flow statement constructed for the future
helps in making managerial decisions. The firm can plan the deployment of its resources
and allocate them among various applications.
'. It acts as a future guide
projected funds flow statement also acts a guide for future to the
management. The management can come to know the various problems it is going to face
in near future for want of funds. The firm5s future needs want of funds. The firm5s future
needs of funds can be projected work in advance and also the timing of these needs.
*. It $elps in appraising t$e use of working capital
funds flow statement helps in explaining haw effectively the
management has used its working capital and also suggests ways to improve working
capital position of the firm.
+. It $elps knowing t$e overall credit wort$iness of a firm
The financial institutions and banks such as state financial institutions.
8ndustrial evelopment #orporation, industrial finance corporation of 8ndia, industrial
development bank of 8ndia, etc., all ask for funds flow statement constructed for a
member of years before granting loans to know the credit worthiness and paying capacity
of the firm. :ence, a firm seeking financial assistance from these institutions has no
alternative but to prepare funds flow statement.
0IMI!&!I#N/ #F F>N-/ F0#W /!&!EMEN!
%. 8t should be remembered that a funds flow statement is not a substitute of an
income statement or a balance sheet. 8t provides only some additional information
as regards changes in working capital.
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'. 8t cannot reveal continuous changes.
). 8t is not original statement but simply is arrangement of data given in the financial
statements.
+. 8t is essentially historic in nature and projected funds flow statement cannot be
prepared with much accuracy.
. #hanges in cash are more important and relevant for financial management than
the working capital.
,R#CE->RE F#R ,RE,&RINJ & F>N-/ F0#W /!&!EMEN!
The funds flow statement is prepared by comparing two balance sheets
and with the help of such other information derived from the accounts as may be needed.
The preparation of a funds flow statement consists of two parts$
%. tatement or schedule of changes in working capital.
'. tatement of sources and application of funds.
1. /tatement or /c$edule of c$anges in Working Capital
(orking #apital means the excess of current assets over current liabilities.
tatement of changes in working capital is prepared to show the changes in the working
capital between the two balance sheet dates. This statement is prepare with the help of
current assets and current liabilities derived from the two balance sheets
s, (orking #apital K #urrent ssets S #urrent 3iabilities
i" n increase in current assets increases the working capital.
ii" decrease in current assets decreases the working capital.
iii" n increase in current liabilities decreases the working capital.iv" decrease in current liabilities increases the working capital.
typical for statement or schedule of changes in working capital is as
follows
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1. /tatement of c$anges in Working Capital
Effect in working
capital
,articulars
,revious
ear
Current
Gear Increase -ecrease
Current &ssets
#ash in hand xxx xxx
#ash at bank xxx xxx
Bills 2eceivable xxx xxx
undry ebtors xxx xxx
Temporary 8nvestments xxx xxx
tock or 8nventories xxx xxx
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2. /tatement of /ources and &pplication of Funds
7unds flow statement is a statement which indicates various sources from
which funds !working capital" have been obtained during a certain period and the
uses a applications to which these funds have been put during that period. Eenerally,
the statement is prepared in tow formats.
i. 2eport 7orm
ii. T 7orm or an ccount form or elf Balancing Type.
/pecimen of Report Form of Funds Flow /tatement
,articulars &mount Rs.4
/ources of Funds
7unds from perations xxx
8ssue of hare #apital xxx
2aising of 3ong term 3oans xxx
2eceipts from
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! Form or an &ccount Form or /elf alancing !pe Funds Flow
/tatement
/ources&mount
Rs.4 &pplications&mount
Rs.4
7unds from perations xxx 7unds 3ost in perations xxx
8ssue of hare #apital xxx2edemption of
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b" The second method !which is generally used" is to proceed from the figure
of net profit and net loss as arrived at from the profit and loss account already
prepared.
7unds from perations by this method can be calculated as under.
Calculation of Funds from #peration
,articulars &mount Rs.4
#losing balance of
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vi"
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b" 7unds from perations can also be calculated by preparing adjusted
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C&/= F0#W /!&!EMEN!
IN!R#->C!I#N
#ash plays a very important role in the entire economic life of a
business. firm needs cash to make payments to its suppliers, to incur day-to-day
expenses and to pay salaries, wages, interest and dividend, etc. 8n fact, what blood is to a
human body, cash is to a business enterpriseY 8t is very essential for a business to
maintain an adequate balance of cash. But many times, a concern operates profitably and
yet it becomes very difficult to pay taxes and dividend. This may be because
lthough huge profits have been earned yet cash may not have been received.
*ven if cash has been received, it may have drained out !used" for some other
purposes.
This movement of cash is of vital importance to the management.
(e have studied in the previous chapter that the two basic financial
statements, i.e., the balance sheet and profit and loss account, provide the essential basic
information on the financial activities of a business, but their usefulness is limited for
analysis and planning purposes. The balance sheet does not disclose the causes for
changes in the assets and liabilities between two different points of time. The profit and
loss account also fails to disclose the reasons for shortage of cash in spite of positive net
income. Thus, another statement, called funds flow statement, was prepared to show the
changes in the assets and liabilities from the end of one period of time to the end of
another period of time. To underline the importance of funds statement, the institute of
#hartered ccountants of 8ndia !8#8" issued in /une,%C>% ccounting tandard-)
dealing with the preparation of statement of changes in 7inancial
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meaningful link between the balance sheet at the beginning and at the end of a period and
the profit and loss account for that period.
ME&NINJ
#ash flow statement is a statement which describes the inflows !sources" and
outflows !uses" of cash and cash equivalents in an enterprise during a period of time.
uch a statement enumerates net effects of the various business transactions on cash and
its equivalents and takes into account receipts and disbursements of cash. cash flow
statement summari4es the causes of changes in cash position of a business enterprise
between dates of two balance sheets. ccording to s-) !2evised", an enterprise shouldprepare a cash flow statement and should present it for each period for which financial
statements are prepared. The terms cash, cash equivalents and cash flows are used in this
statement with the following meanings$
%. #ash comprises cash on the hand and demand deposits with banks.
'. #ash equivalents are short term, highly liquid investments that are readily
convertible into known amounts of cash and which are subject to an insignificant
risk of changes in value. #ash equivalents are held for the purpose of meeting
short-term cash commitments rather than for investment or other purposes.
). #ash flows are inflows and outflows of cash and cash equivalents. 7low of cash
is said to have taken place when any transaction makes changes in the amount of
cash and cash equivalents available before happening of the transaction. 8f the
effect of transaction results in the increase of cash and its equivalents, it is called
an inflow !source" and if it is results in the decrease of total cash, it is known as
outflow !use" of cash.
C0&//IFIC&!I#N #F C&/= F0#W/
#ash flows are classified into three main categories$
%. #ash flows from operating activities.
'. #ash flows from investing activities.
). #ash flows from financing activities.
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%. Cas$ Flows from #perating &ctivities$
perating activities are the principal revenue-producing activities of the
enterprise and other activities that are not investing or financing activities. The
amount of cash flows arising from operating activities is a key indicator of the extent
to which the operations of the enterprise have generated sufficient cash flows to
maintain the operating capability of the enterprise, pay dividends, repay loans, and
make new investments without recourse to external sources of financing. 8nformation
about the specific components of historical operating cash flows is useful, in
conjunction with other information, in forecasting future operating cash flows.
*xamples of cash flows from operating activities are$
!a" cash receipts from the sale of goods and the rendering of servicesD
!b" cash receipts from the royalties, fees, commissions, and other revenueD
!c" cash payments to suppliers of goods and servicesD
!d" cash payments to and on behalf of employees.
%. Cas$ Flows from #perating &ctivities 8nvesting activities are the acquisition and disposed of long-term assets and
other investments not included in cash equivalents. The separate disclosure cash flows
arising from investing activities is important because the cash flows represent the extent
to which expenditures have been made for resources intended to generate future income
and cash flows.
*xamples of cash flows arising from investing activities are.
!a" #ash payments to acquire fixed assets !including intangibles".
These payments include those relating to capitali4ed research P
evelopment costs and self constructed fixed assetsD
!b" #ash payments to acquire shares, warrants, or debt instruments of
ther enterprises and interests in joint ventures !other than
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). Cas$ Flows from Financial &ctivities$
7inancing activities are activities that results in changes in the si4e and
composition of the owner5s capital !including preference share capital in the case of a
company" and borrowings of the enterprise The separate disclosure of cash flows arising
from financing activities is important because it is useful in predicting claims on future
cash flows by providers of funds !both capital and borrowings" to the enterprise.
*xamples of cash flows arising from financing activities are$
!a" cash proceeds from issuing shares or other similar instrumentsD
!b" cash proceeds from issuing debentures, loans, notes, bonds, and other short-term
borrowingsD
!c" cash repayments of amounts borrowed such as redemption of debentures, bonds,
preference shares
#(EC!I5E/
%. 8nformation about the cash flows of an enterprise is useful in providing users of
financial statements with a basis to assess the ability of the enterprise to generate cash
and cash equivalents and the needs of the enterprise to utili4e those cash flows.
'. The economic decisions that are taken by user require an evaluation of the ability
of an enterprise to generate cash and cash equivalents and the timing and certainly of
their generation.
). The statement deals with the provision of information about the historical
#hanges in cash and cash equivalents of an enterprise by means of a cash flow
statement which classifies cash flows during the period from operating investing and
financing activities.
/C#,E
%. n enterprise should prepare a cash flow statement and present it for each period
for which financial statements are presented.
'. ?sers of an enterprise5s financial statements are interested in how the enterprise
generates and uses cash and cash equivalents. This is case regardless of the nature
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of the enterprise5s activities and irrespective of whether cash can be viewed as the
product of the enterprise, as may be the case with a financial enterprise, as may be
the case with a financial enterprise.
). *nterprises need cash for essentially the same reasons, however different their
/E/ &N- /IJNIFIC&NCE #F C&/= F0#W /!&!EMEN!
#ash flow statement is of vital importance to the financial management. 8t is an
essential tool of financial analysis for short-term planning. The chief advantages of cash
flow statement are as follows$
!%" ince 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.
!'" projected cash flow statement can be prepared in order to know the future cash
position of a concern so as enable a firm to plan and coordinate its financial
operations properly. By preparing this statement, a firm can come to know as to
how much cash will be generated into the firm and how much cash will be needed
to make various payments and hence the firm can well plan to arrange for the future
requirements of cash.
!)" 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.
!+" series of intra-firm and inter-firm cash flow statements reveals whether the firm5s
liquidity !short-term paying capacity"is improving or deteriorating over a period of
time and in comparison to other firms over a given period of time.
!" #ash flow statement helps in planning the repayment of loans, replacement of fixed
assets and other similar log-term planning of cash. 8t is also significant for capital
budgeting decisions.
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!0" #ash flow analysis is more useful and appropriate than funds flow analysis for
short-term financial analysis as in a very short period it is cash which is more
relevant then the working capital for forecasting the ability of the firm to meet its
immediate obligations.
!1" #ash flow statement provides information of all activities classified under
operating, investing and financing activities, the funds statement even when
prepared on cash basis, did not disclose cash flows from such activities separately,
Thus, cash flow statement is more useful than the funds statement.
0IMI!&!I#N/ #F C&/= F0#W /!&!EMEN!/
espite a number of uses, cash flow statements suffer from the following limitations$
!%" s cash flow statement is based on cash basis of accounting, it ignores the basic
accounting concept of accrual basis.
!'" ome people feel that as working capital is a wider concept of funds, a funds flow
statement provides a more complete picture than cash flow statement.
!)" #ash flow statement is not suitable for judging the profitability of a firm as non-
cash charges are ignored while calculating cash flows from operating activities.
,RE,&R&!I#N #F C&/= F0#W /!&!EMEN!
The #ash 7low tatement is to be presented as per the -) of the 8nstitute of
#hartered ccountants of 8ndia !8#8". The 8#8 issued -)in /une, %C>% for the first
time. 3ater in 6arch, %CC1 it revised the standard. The model stipulated in -) is the
widely accepted model for presentation of #ash 7low tatements.
ll the listed companiesAentities whose financial year ends on 6arch, %CC0
and thereafter will be required to give #ash 7low tatement along with Balance heet
and
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-I/!INC!I#N E!WEEN F>N-/ F0#W /!&!EMEN! &N-
C&/= F0#W /!&!EMEN!
Funds Flow /tatement Cas$ Flow /tatement
!%" 8t is based on accrued basis ofccounting.
!'" 7unds flow statement is concerned withchanges in (orking #apital positionBetween two Balance heet.
!)" 7unds flow statement is based on awider concept of funds i.e., working#apital.
!+" schedule of (orking capital changesis prepared in the case of 7unds 7lowtatement.
!" 8t shows the changes of not only cashbut also of other current assets likedebtors, stock etc
!0" The statement does not start with anyopening of balance of any account anddoes not even and with any such
closing balance of any account.!1" 8t shows the changes in the currentliabilities like sundry creditors, bills" 8n this case, the profit from operationor the net profit is considered as a
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,RE/EN!&!I#N #F C&/= F0#W /!&!EMEN!
(hile preparing the cash flow statement, cash flows from operating activities
are presented first, followed by investing activities and then financing activities. The
individual inflows and outflows relating to investing and financing activities are
presented separately in their respective categories. The operating activities section can be
presented using the direct method or indirect method. 8n the direct method cash flow
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statement is presented primarily on a cash receipts and cash payments basis, instead of on
accrual basis. 8n the indirect method, net income is adjusted for items that affected net
income but did not affect cash.
-irect Met$od$
Format of Cas$ Flow /tatement
,articulars&mount
Rs
&mount
Rs. #ash 7lows from perating ctivities #ash 2eceipts$
ales 8nterest 2eceived
#ash payments for
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. #ash 7low from perating ctivities$ &et 8ncome
djustments to 2econcile &et income to &et cash
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Chapter-VI
DATA ANALYSIS
,articulars 2;11 2;12 Increase -ecrease
Current &ssets
undry debtors >91%'>9+ )1>0+'9 +'>0)>+
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#ash and bank )+9+)'9 %0C9)'0 %10+0>90
ther current assets %'''> >11) 19'
3oans and advances 1))%0 C')19C %C9%C)
!otal Current &ssets 11'*2;*: 132:2;: Current 0ia)ilities
#urrent liabilities '%C0C%0 )>C%'0 %0CC+)+C
00C1+ >'C)+ %+)>%%
!otal Current 0ia)ilities 3;2****1 +11+1
Working Capital C& C,>
ther #urrent ssets >1,1) >)+,C0) '',1C9
3oans and dvances C'),19C >C,C%C '1,1C9
!otal Current &ssets
1"32:"2;
:
+2";21";:
1
Current 0ia)ilities
#urrent 3iabilities)>,C%,'0
>,9+,>'1)9,)0,+)
>
,',C)+ >,9%9,1C+ %,%+9
!otal Current 0ia)ilities
+"11+"1
1*";*'"*2
1
1"3;+"12
+
31";'1"'+
:
Net Working C& < C04
++,'%%,99C
,C,+09
ecrease in (orking#apital
%%,1++,+%
%%,1++,+%
''"''"*
;
''"''"*
;
31";'1"'+
:
31";'1"'+
:
/ources
&mount
Rs4 &pplications
&mount
Rs4
ecrease in (orking #apital %%,1++,+% 7unds 3ost in peration %),11,+9C
#hange of epreciation on7ixed ssets ',9>9,)%1
ecrease in eferred Tax3iability 01,)C
13":2"+*: 13":2"+*:
C$anges in Work
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,articulars 2;; 2;1; -ecrease
Current &ssets
#ash and Bank )>,9'),0)+ C,>'C,)'1 '>,%C+,)91undry ebtors )','00,0 >,C9',C'0 '0,0)0,)0%
ther #urrent ssets >)+,C0) 1C,))0 1,0'1
3oans and dvances >C,C%C C),11 1,>)>
!otal Current &ssets +2";21";:1 *"+*'"3*
Current 0ia)ilities
#urrent 3iabilities >,9+,>'1 )9,>1,C%) '',>'%,9>0
,9%9,1C+ %,99>,19) 1,99',9C%
!otal Current 0ia)ilities 1*";*'"*21 31"::"*1* '1"++1";2; 33"**"2;
Net Working C& < C04 ,C,+09 )1,>>9,1)9
ecrease in (orking #apital %>,91+,1)9 %>,91+,1)9
''"''"*; ''"''"*; '1"++1";2; '1"++1";2;
Funds Flow /tatement
/ources
&mount
Rs4 &pplications
&mount
Rs4
Funds From Operation %0,C'C,''18ncrease in (orking#apital %>,91+,1)9
#hange of epreciation on7ixed ssets %,),+%
ecrease in iffered Tax3iability )>C,C+>
1:"*"*+: 1:"*"*+:
C$anges in Work
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,articulars 2;;: 2;; Increase -ecrease
Current &ssets
#ash and Bank C,>'C,)'1 'C,'1,C+ %C,+'>,0%>undry ebtors >,C9',C'0 '>,)++,%)) )9,>,1C)
ther #urrent ssets 1C,))0 1),'91 0,>1%
3oans and dvances C),11 ')0,>00 1%0,>C%
!otal Current &ssets *"+*'"3* ':"'+"1'1
Current 0ia)ilities
#urrent 3iabilities )9,>1,C%) ',)),10 '>,'',%1
,19) ,9,%C0 +,+%,+C)
!otal Current 0ia)ilities 31"::"*1* +";3"'2 3'":1+"1++ :"*;*"**
Net Working C& < C04 )1,>>9,1)9 9,019,%CC
ecrease in (orking #apital %',1>C,+0C %',1>C,+0C
';"*+;"1 ';"*+;"1 :"*;*"** :"*;*"**
Funds Flow /tatement
/ources
&mount
Rs4 &pplications
&mount
Rs4
ecrease in (orking #apital %',1>C,+0C7unds 3ost inperation )%,9%0,1+
#hange of epreciation on 7ixedssets %,)','C
8ssue of hare #apital %0,0)C,)09
8ncrease in iffered Tax 3iability '0',01
31";1*"+' 31";1*"+'
C$anges in Work
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,articulars 2;;+ 2;;: Increase -ecrease
Current &ssets
#ash and Bank 'C,'1,C+ '),9+0,9+> 0,'%%,>C1
undry ebtors '>,)++,%)) %9,'9>,1++ %>,%),)>Cther #urrent ssets 1),'91 1),'91
3oans and dvances ')0,>00 0>,C01 ))',%9%
!otal Current &ssets ':"'+"1'1 33":23"+'
Current 0ia)ilities
#urrent 3iabilities ',)),10 ),19+,)C> %,)9,0+'
'',1%% ),1'1,+>
!otal Current 0ia)ilities +";3"'2 '"'2+"1; 2*"33"13' ";'"':*
Net Working C& < C04 9,019,%CC '>,'C0,09
ecrease in (orking #apital '',)1),+C
';"*+;"1 2:"2*"*'; 2*"33"13' 2*"33"13'
Funds Flow /tatement
/ources
&mount
Rs4 &pplications
&mount
Rs4
7unds 7rom perations C9,0>8ncrease in (orking#apital '',)1),+C
#hange of epreciation on 7ixedssets %>,1>>,+1+
8ncrease in iffered Tax 3iability ',C>C,999
6iscellaneous expenses ,)C9
22"3+3"' 22"3+3"'
e!so"s#
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The sundry debtors increased in the year '9%% when compared with '9%9 because
there is an increased in P6 fee.
The cash and bank balance of '9%% is decreased due to the payment of dividends
declared in '9%9
The loans and advances include employee claims and deposits with governmentD
in the year '9%%, the loans and advances are decreased because, the employees set
off their claims.
The other current assets majorly include interest on deposits. The interest is
decreased because the deposits are used for the payment of dividend.
8n the case of current liabilities there is a decreased in the year '9%%. The provisions are also increased, the additional provision is created for, raised
sundry debtors.
7or the purpose of preparation of 7unds 7low tatement we have to
calculate the changes in (orking #apital.
The excess of #urrent ssets over #urrent 3iabilities is called &et
(orking #apital.
I"te$%$et!tio"The (orking #apital tatement treated as$
The undry debtors are increased in +',>0,)>+A- the year '9%% as compared to
the year '9%9.
The #ash and Bank balances are decreased in %1,0+0,>90A- the year '9%% as
compared to the year '9%9. Because the Eenting 3anco company has paid the
dividends in '9%9.
The ther #urrent ssets are also decreased in 1,9,'A- the year '9%% as
compared to the year '9%9. Because the company canceled the dividends in '9%9.
The interest is decreased that is the reason #urrent ssets are decreased in '9%%.
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The 3oans and dvances are also decreased in %,C9,%C)A- the year '9%% as
compared to the year '9%9. Because here the company set-off the *mployee5s
claims.
The #urrent 3iabilities are decreased in %0,CC+,)+CA- the year '9%% as compared
to the year '9%9. Because additional consultancy provided by the company.
The %%A- the year '9%% as compared to the year
'9%9. Because the sundry debtors are increased.
The verall (orking #apital is increased in +%,%0+,)C>A- the year '9%%.
8n 7unds 7low tatement the 7ixed ssets are treated as source because
depreciation of fixed assets are decreased in >, C),CCA- the year '9%%, the reasonis 7ixed ssets does not purchase by the company.
eferred tax liability is decreased in ), %,C''A- the year '991.
I"te$%$et!tio"
The (orking #apital treated as$
The undry debtors are increased in ,>C,>A- the year '9%9 as compared tothe year '99C.
The #ash and Bank balances are increased in %),000,0C'A- the year '9%9 as
compared to the year '99C.
The ther #urrent ssets are increased in '',1C9A- the year '9%9 as compared to
the year '99C.
The 3oans and dvances are also increased in '1,1C9A- the year '9%9 as compared
to the year '99C.
The #urrent 3iabilities are also increased in )9,)0,+)>A- the year '9%9 as
compared to the year '99C.
The
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I"te$%$et!tio"
The (orking #apital treated as$
The undry debtors are decreased in '0,0)0,)0%A- the year '99C as compared to
the year '99>.
The #ash and Bank balances are increased in '>,%C+,)91A- the year '99C as
compared to the year '99>.
The ther #urrent ssets are increased in 1,,0'1A- the year '99C as compared to
the year '99>.
The 3oans and dvances are decreased in 1,>)>A- the year '99C as compared to
the year '99>.
The #urrent 3iabilities are decreased in '',>'%,9>0A- the year '99C as compared to
the year '99>.
The ,1C)A- the year '99> as compared to
the year'991.
The #ash and Bank balances are decreased in %C,+'>,0%>A- the year '99> as
compared to the year '991.
The ther #urrent ssets are decreased in 0,,>1%A- the year '99> as compared
to the year '991.
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The 3oans and dvances are increased in 1,%0,>C%A- the year '99> as compared
to the year '991.
The #urrent 3iabilities are increased in '>,'',%1A- the year '99> as compared
to the year '991.
The ,))C,00A- the year '99> because
here, the company declared the dividends...
I"te$%$et!tio"
The (orking #apital tatement treated as$
The undry debtors increased in %>,%),)>CA- the year '991 as compared to the
year'990.
The #ash and Bank balance is increased in 0,'%%,>C1A- the year'991 as compared
to the year '990.
The ther #urrent ssets are also increased in 1,),'91A- the year '991 as
compared to the year '990.
The 3oans and dvances are decreased in )),'%9A- the year '991 as compared to
the year '990.
The #urrent 3iabilities are decreased in %,)9,0+'A- the year '991 as compared to
the year '990.
The
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I0I#JR&,=G
REFFERE- ##K/
78&S 6&E*6*&T - 8. 6.
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$,,N-I
alance s$eet as on 31st Marc$ 2;11
&mount in Rs.4
,articulars 2;1; < 11 2;; < 1;
/#>RCE/ #F F>N-/
14 /=&RE=#0-ER/S F>N-/
!a" #apital %>,1%C,'>9 %>,1%C,'>9
!b" 2eserves and urplus 1>,)+9,1)) )1,1+,)1'
C1,909,9%) 0,+1),0'
24 -EFFERE- !&9 0I&I0I!G ',+1>,+'> ',1C+,)9
!#!&0 CC,)>,++% C,'0>,99'&,,0IC&!I#N #F F>N-/
14 FI9E- &//E!/
!a" Eross Block )%,91,C0 'C,101,C1C
!b" 3ess$ epreciation %0,>C+,0' %+,1%9,C>0
!c" &et Block %+,%0),9)+ %,90,CC)
24 C>RREN! &//E!/" 0#&N/ &N- &-5&NCE/
!a" undry ebtors >9,1%',>9+ )1,>0,+'9
!b" #ash and Bank Balances )+,9+),'9 %,0C9,)'0
!c" ther #urrent ssets %',''> >1,1)
!d" 3oans and dvances 1)),%0 C'),19C
%%,0+',90> C%,)'>,'9>
0E// C>RREN! 0I&I0I!IE/ &N- ,R#5I/I#N/
!a" 3iabilities '%,C0,C%0 )>,C%,'0
!b" ,00C,1+ >,',C)+
)9,'00,00% +1,%%1,%CC
NE! C>RREN! &//E!/ >,)1,+91 ++,'%%,99C
!#!&0 CC,)>,++% C,'0>,99'
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,rofit and 0oss &ccount for t$e period ended on 31st Marc$ 2;11
&mount in Rs.4
,articulars 2;1;< 11 2;; @ 1;
I.INC#ME
8ncome from ervices C0,0+,C9' ,9,0+C
ther 8ncome ',)C>,''9 ','>,>C0
!#!&0 CC,9),%'' 1,>)0,+
II.E9,EN-I!>RE
dministrative and ther *xpenses >%,))+,19 1,CC,1%C>%,))+,19 1,CC,1%C
3ess$ *xpenditure 2eimbursable under perations
and 6aintenance greement +C,+1+,)9 +C,)+C,>C'
!#!&0 )%,>09,++ '0,'+C,>'1
III. ,R#FI! EF#RE -E,RECI&!I#N &N- !&9&!I#N 01,%C',011 )%,>0,1%>
9%
9
urplus brought forward from %
5I. ,R#FI! &5&I&0&0E F#R &,,R#,RI&!I#N/ 01,'>,0%1 0),'%%,+)%
Transfer to Eeneral 2eserve - +,+C,%>
8nterim ividend 2s.% per equity hare !'99- &83" - '>,91>,C'9
,90C
5II. &0&NCE C&RRIE- !# &0&NCE /=EE! 01,'>,0%1 '0,0CC,'1
Earnings ,er /$are < asic P -iluted 22 1;
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