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FUNDS FLOW STATEMENT

INTRODUCTION

The Funds flow statement is the changes in financial position are prepared to

determine only the sources and uses of working capital between dates of two balance

sheets. Working capital is defined as the difference between current assets and current

liabilities. Working capital determines the liquidity position of the firm. As a

historical analysis, the statement of changes in working capital reveals to

management the way in which working capital was distained and used with the

insight management can prepare the estimate of the working capital flows. A

statement reporting the changes in working capital is useful in addition to the

financial statements.

A projected statement of changes in working capital is immensely useful in

the firms long range planning management, for example, wants to anticipate the

working capital flows in order to plan the repayment schedules, its long- term debt for

a fast growth and expansion, a firm needs larger on long- term assets are also required

to determine whether or not adequate working capital will be generated to meet the

firms expansion, if not the firm can make arrangements in advance to procure funds

from outside to meet its needs.

The study will provide a use full model to the financial analysts and corporate

planners to enable them to determine the effects of the various funds on the assets

holding patterns. With the help of such a model, one can quantify the impacts of the

change in employed capital on the fixed assets and working capital of a firm.

In the study we want to test the statistical relation between the change in the

components of working capital and the fixed assets of a company. Such a study may

also be useful in investment and financing decisions. Funds flow statement is defined

as the statement of changes in financial position, Prepare to determine only the

sources and the uses of working capital between the dates of two balance sheets.

SOURCES OF FUNDS

Issue of additional share capital or debentures for cash

VCR INSTITUTE OF MANAGEMENT STUDIES, ChittoorPage 1


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Borrowings made by the firm for a long term.

Non operating incomes such as income from investment or profit from the

sale of assets /investment

APPLICATION OF FUNDS

If there is business loss to the firm then this tantamount to decrease or use of

funds

The redemption of preference share capital or decrease during a year also

utilize the funds

Repayment of a long term loan during the year.



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INDUSTRY PROFILE

FRUIT PROCESSING INDUSTRY IN INDIA

India is the worlds largest producer of food next to China, and has the

potential of being the biggest with the food and agricultural sector. The total food

production in India is likely to double in the next ten years and there is an opportunity

for large investments in food and food processing technology skills and equipment,

especially in the areas of canning dairy and food processing, specialist processing

packing, frozen food refrigeration and thermo processing. Fruits and vegetables,

fisheries, milk, and milk products, meet and poultry, packaged/convenience foods,

alcoholic beverages and soft drinks and grains are important sub sectors of the food

processing industry. Health food and health food supplements are another rapidly

rising segment of this industry which is gaining vast popularity amongst the health

conscious.

India is one of the worlds major food producers but accounts for less than 1.5

percent of international food trade. This indicates vast Scope for both investors and

exporters. Food exports in 1998 stood at US dollars 5.8 billion whereas the world

total was US dollars 438 billions. The Indian food industries sales turnover is Rs

140,000 crore (1 crore=10 million) annually as at the start of year 2000. the industry

has the highest number of plants approved by the US food and Drug Administrative

(FDA) outside the USA.

Indias food processing sector covers fruit and vegetables; meat and poulitry; milk

and milk products alcoholic beverages, fisheries, plantation, grain processing and

other consumer product groups like confectionery, chocolates and cocoa products,

Soya-based products, mineral water, high protein foods etc. we cover an exhaustive

database of an array of suppliers, manufacturers, explores and importers widely

dealing in sectors like the food industry, Dairy industry, Indian beverage industry etc.

we also cover sectors like dairy plants, canning, bottling plants, packaging industries,

process machinery etc.



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The most promising sub-sectors includes includes-soft-drink bottling,

Confectionery manufacture, Fishing, Aquaculture, Grain-based products, meat and

poultry processing, Alcoholic beverages, milk processing, Tomato paste, Fast-food,

Ready-to-eat break fast cereals, Food additives, flavors etc

FOOD PROCESSING MARKET IN INDIA IN 2007

India is one of worlds major food producers but accounts for less the 1.5 per

cent of international food trade. This indicates vast scope for both investors

and exporters. Food exporters in 1998 stood at US $5.8 billion whereas the

world total was US $ 438 billion.

The Indian food industrys sales turnover is Rs 140.000 crore ( 1 core=10

million) annually as at the start of year 2000. The industry requires about Rs 29.000 crore in investment over the next five

years to 2005 to create necessary infrastructure, expand production facilities

and state-of-the-art-technology to match the international quality and

standards.

The office of the Agricultural Affairs of the USDA/Foreign Agricultural

Services in New Delhi says that one of Indias proudest accomplishments has

been achieving a tenuous self-sufficiency in food production and that the

country produces a wide variety of agricultural products at prices that ate at of

below world values in most cases.

The Indian palate is accustomed to traditional foods, mostly wheat and rice

based, rather than potato and corn-based western palate. In marketing

perspective, this is considered an important factor for foreign marketers.

The USDA reports says initials consumer-ready food products may have to be

tailored to include Indian spices and traditional ingredients. In addition to

traditional tastes, there are other social factors which affect consumption in

India. Hindus account for approximately 80 per cent of Indias population,

and while only 25 or 30 per cent are strict vegetarians, beef slaughter is

prohibited in all but two states (Kerala and Bengal) and consumption of other

meats is limited. Incidentally, India is the only country where the US-base

Mac Donalds sells its burgers without any beef content and offers purely

vegetarian burgers.



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Indias middle class segment will hold the key to success or failure of the

processed food market in India. Of the countrys total population of one

billion, the middle class segments account for about 350-370 million. Though

a majority of families in the segment have non-working housewives or can

afford hired domestic help and thus prepare foods of their taste in their own

kitchens, the profile of the middle class is changing steadily and hired

domestic help is becoming costlier. This is conducive to an expansion in

demand for read-to-eat Indian-style foods.

Indias food processing sector covers fruit and vegetables, meat and poultry,

milk and milk products, alcoholic beverages, fisheries, plantation, grain

processing and other consumer product groups like confectionery, chocolates

and cocoa products, Soya-based product, mineral water, high protein foods

etc.

According to latest official statistics, India exported processed fruits and

vegetables worth Rs 5240 million in 1997-98. The horticulture production is

around 102 million tones. Foreign investment since 1991, when economic

liberalization started, stood at Rs 8.800 crore .Products that have growing

demand, especially in the Middle East countries include pickles, chutneys,

fruit pulps, canned fruits, and vegetables, concentrated pulps and juices,

dehydrated vegetables and frozen fruits and vegetables.

Another potential processed food product is meat and poultry products. India

ranks first in world cattle population, 50 per cent of buffalo population and

one-sixth of total goat population of the world. Buffalo meat is surplus in

India. There is vast scope to set up modern slaughter facilities and cold store

chains in meat and poultry processing sector. Indias current level of meat and

meat-based exports is around Rs 8,000 million. In last six years foreign

investment in this segment stood at Rs 5,000 million which is more than 50

per cent of the total investment made in this sector.



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Compared with meat, poultry industry has registered significant growth.

Indian ranks fifth in the world with annual egg production of 1.61 million

tones. Both poultry and egg processing units have come in a very big way in

the country. India is exporting egg powder, frozen egg yolkl and albumin

powder to Europe, Japan and other countries. Poultry exports are mostly and

Oman. Indian poultry meat products have good markets in japan, Malaysia,

Indonesia and Singapore. While meat products registerd a growth of 10 per

cent, eggs and broilers registered 16-20 per cent growth.

There are about 15 pure line and grand parent franchise projects in India.

There are 115 layer and 280 broiler hatcheries producing 1.3 million layerparents and 280 million broiler parents. They turn supply 95 million hybrid

layer and 275 million broilers, day old chick. Presently there are only five egg

powder plants in India which is considered insufficient in view of growing

export demand for different kind of powder-whole egg, yolk and albumen.

The scope of foreign investment and state-of- the-art technology in this field is

therefore tremendous.

Milk and milk products is rated as one of the most promising sectors which

deserves foreign investment in big way. When the world milk production

registered a negative growth of 2 per cent, India performed much better with 4

per cent growth. The total milk production is around 72 million tones and the

demand for milk is estimated at around 80 million tones.

By 2005, the value of the Indian dairy produce is expected to be Rs 1,000,000million. In last six years foreign investment in this sector stood at Rs 3600

million which is about one-fourth of total investment made in this sector.

Manufacture of casein and lactose, largely being imported presently, has good

scope. Exports of milk products have been decimalized.

Grains could emerge as major export earner for India in coming years. Indias

food grains production is now at around 225-230 million tones. These include



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rice, jawar, bajra, maize, wheat, gram and pulses. Indian basmati rice enjoys

command in the international market. Besides growing Middle eat market for

basmati rive, many other countries are showing interest for this food grains. In

1998-99 export of basmati and non-basmati rice stood at Rs 6200 million .

There is a total rice milling capacity of 186 million tones in the country.

Among plantation, tea emerged as major foreign exchange earner. India is the

largest producer and exporter of black tea. However, the most worrying factor

for Indian tea industry is that form early next year with the implementation of

tea imports into the country, India tea may face a stiff competition within the

country a swell, specially threat of Sri Lanka presence in the Indian market is

looming large.

The current years tea export prospect is not that good in terms of forex

earnings because international prices have fallen significantly this year. An

India export between 150-170 million kilograms of tea per annum. Of course,

the scope of foreign investment in this sector stood at Rs 7000 million which

about 70 percent of the total investment made so far. The IMFL (Indian Made

Foreign Liquor) primarily comprises wine, vodka, gin, whisky, rum, and

brandy. Draught beer is a comparatively recent introduction in the Indian

market. The market beer market is estimated at Rs 7000 million a year. One of

the major advantages for any investor eyeing the Indian liquor market is that

India offers enough raw materials like molasses, barley, maize, potatoes,

grapes, yeast and hops for the industry.

Yet another catchy investment sector is fisheries. There is growing canned and

processed fishes from India. The marine fish include prawn, shrimps,tuna,cuttlefish, squids, octopus, red snappers, ribbon fish mackerel, lobsters, cat

fish etc. in last six years there was substantial investment is fisheries to the

tune of 30,0000 million of which foreign investments were of the order of Rs

7000 million. The potential in the Exclusive Economic Zone of 3.9 million

tones, catch is to tune of 2.87 million tones. Harvesting from inland sources is

around 2.7 million tones.



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The biggest bottleneck in expanding the food processing sector, in terms of

both investment and exports, is lack of adequate infrastructure.

Without a strong and dependable cold vital sector like food processingindustry, which is, base mostly on perishable products cannot survive and

grow. Even at current level of production, farm produce valued at Rs 70,000

million is being wasted every year only because there is no adequate storage,

transportation, cold chain facilities and other infrastructure supports. Cold

chain facilities are miserably inadequate to meet the increasing production of

various perishable like milk, fruits, vegetables, poultry, fisheries etc.

Prevention of Food Adulteration laws is not only stringent one but time

consuming also. It is considered as an archaic and no industry friendly food

law. It substantial varies from Codex standard. Harmonization of multiple

food laws is an urgent necessity.

Indian Food processing in the year of 2008

The Indian food processing market is one of the largest in terms of production,

consumption, and export and import prospects. Since India is one of the major food

producers worldwide, with new reforms, it presents exciting opportunities for

commercial openings for a wide range of investors across the globe.

RNCOS report, Indian Food Processing (2008), provides research and

objective analysis on the Food processing Industry in India. This report helps clients

to analyze the opportunities critical to the success of the food processing industry in

India.

India Food Processing Industry

This section analyses the performance of the Indian food processing

industry. Currently, processed food accounts for merely 2% of total food production

in India, which is very low as compared to the western countries. Taking market

forces such as rising income level an changing consumer behavior due to rapid

economic growth into consideration, it is excepted to reach a growth rate of 10% in



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2010 & 25% in 2020. in food processing sector, dairy products (includes milk,

Ethnic sweets etc) and packed food provides immense opportunities for investment.

Key Findings Currently the Indian food processing industry is basically export oriented.

Although domestic consumption of processed is low but it is fast picking up

with rising income levels & changing consumer behavior due to economic

growth.

Indian processed food industry provides competitive advantages over other

countries due to cheap workforce, government initiatives (tax holidays) &

availability of raw materials. Existence of untapped large consumer base with rising income levels. Indian

food processing level as compared to countries like USA, France & Malaysia

continues to remain very low. However, with emerging positive market

forces, it is all set to boom.

Food processing Industries in India as per July 2009

The Indian Food industry is estimated to be worth over US$ 200 million andaccording to the confederation of Indian industry (CII) is expected to grow to USS

310 billion by 2015. India is one of the worlds major food processing producers but

accounts for less than 1.5 per cent of international food trade. This indicates vast

scope for both investors and exporters.

India is the worlds second largest producer of food next to China, and has the

potential of being the biggest with the food and agricultural sector. In this respect, the

country is endowed with a large production base for a variety of raw materials

covering food crops, commercial crops and fibers due to its varied agro-climate

conditions.

Also , India has the highest number of plants approved by the US Food and

Drug Administrative FDA) outside the USA.

Import sub sectors in food processing industries are:- Fruit & Vegetable

Processing. Fish-processing, Milk processing, Meat & poultry processing,

packaged/Convenience Foods, Alcoholic beverages & Soft drinks and gain

processing etc.



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Policy Initiatives

The Government has formulated and implemented several schemes to provide

financial assistance for setting up and modernizing of food processing units, creation

of infrastructure, support for research and development and human resourcedevelopment in addition to other promotional measures to encourages the growth of

the processed food sector.

The center has permitted under the income Tax Act a deduction of 100

percent of profit for five years and 25 per cent of profit in the next years in

case of new agro processing industries set up to package and preserve and

vegetables.

Excise Duty of 16 per cent on dairy machinery has been fully waived off andexcise duty on meat, poultry and fish products has been reduced from 16

percent to 7 percent.

Most of the processed food items have been exempted from the purview of

licensing under the industries (Development and regulation) Act, 1951, expect

items reserved for small-scale and alcoholic beverages.

Food processing industries were included in the list of priority sector for bank

lending in 1999.

Automatic approval for foreign equity up to 100 per cent is available for most

of the processed food items except alcohol, beer and those reserved for small

scale sector subject to certain conditions.

Complete exemption from duty to ready-to-eat packaged food.

Reduction of excise duty on refrigerated motor vehicles form 16 percent to 8

percent, together with an exemption from customs duty.

The government has also enacted the food Safely and standards Bill 2005 that seeks

to create a regulatory body for the food-processing sector and set standards for

manufacture and import of quality food. This law also brings together 13 food

legislations under a common umbrella.

As can be seen, the present scenario of processing India consists of few large

national processor, many regional level Processors, and tiny sector level processors.



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In fact 90% of the processing industries are in small scale and cottage/home scale.

There are 32 units in the organized sector with an installed capacity of 1,08,000 MTS

per annum, representing 10% of the total installed capacity. The kind of situation

should have normally led to development of linkages between them. However the

linkages have not developed because the setting processing infrastructure is not

complementing to each other and in most of the cases they are similar in nature albeit

with lower capacities and lower capacities and lower end technology. Thus there is

excess capacity and many sick units and very low capacity utilization while the total

quantity out of the present production processed remains low and less than 10%.

COMPANY PROFILE

INTRODUCTION

Varma, a professionally managed multinational public limited

company,Incorporated in 1971 is a leading internationally reputed manufacturers and

exporters of fruit pulp and concentrates in canned and aseptic packing frozen pulp

and vegetables, fruit powders etc. The company enjoys a lions share of the fruit pulp

and concentrate world market.

HISTORY OF FOOD AND INNS Ltd.

The division combines people with vast experience in agric-trading with the

VARMA INTERNATIONAL (P) Ltd Groups credibility to justify its premier

standing in the trading arena. The division was set up in 1967 and since then has

handled a wide range of products - such as Sesame Seeds, Processed Fruits, Food

grains, Aqua etc.

VARMA INTERNATIONAL (P) Ltd began its fruit processing operations in

early 70s.However fruit processing operations have been given a special thrust since

the last season with an emphasis on developing strategic partnerships across the value

chain especially fruit procurement and processing. VARMA INTERNATIONAL (P)

Ltdhas established it's presence as a reliable and competitive exporter to Coca Cola,

USA, Western Europe, Far East, Middle East etc.



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BACKGROUND OF VARMA INTERNATIONAL (P) Ltd

Situated at Chittoor in Andhra Pradesh, the mango belt in India, VARMA

INTERNATIONAL (P) Ltd (VIL) is a 100% Export Oriented Unit (EOU) processing

Tropical Fruit Purees, Concentrates and Fresh Fruits VARMA INTERNATIONAL

(P) Ltd was started keeping in mind the local farming community wealth. The

farming community is an integral part and forms the backbone of the organization. In

its effort to be a forerunner in the chosen areas of business in terms of best practices

in quality and technology, VIL plans to benefit armors, the industry and the nation in

a phased manner.

VARMA INTERNATIONAL (P) Ltd believes in empowering farmers by

providing technical assistance from research institutes in the food industry to support

the farmers in achieving better quality and higher yields by developing the gardening

and harvesting techniques. Further to educating farmers with latest horticultural

techniques, VARMA INTERNATIONAL (P) Ltdis encouraging farmers to mobilize

the fruits directly to the factory, thereby minimizing the fruit handling damages and

high value realizations. The first phase has been completed, by setting up of state-of-

the-art fruit processing plant to produce natural tropical fruit puree and concentrates.

PROMOTERS BACKGROUND

Mr. Utsav Dhupelia , a Chartered Accountant from U.K., looking after the

routine affairs of the company, is the brain and brawl for taking the companys

turnover from Rs.5 crores (USD1.1 MIO) to Rs.70 Crores (USD 16 MIO) giving the

status of government recognized EXPORT HOUSE.

With the back up of technical and managerial support staff, the state of art

technology implementation, innovative R & D and Lab facilities, the doyen guidance

of Mr.Utsav coupled with the contribution of other directors, the company is poised

for a steady and continuous growth graph moving upwards in all Para meters.

ACHEIVEMENTS



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Company for the first time in India commissioned Skid Mounted Modular

Microprocessor Controlled Aseptic Plant, which was developed in Europe in

year 2000.

The plant is Highly Energy, and cost effective

The success of the first plant encouraged us to commission the two more

Aseptic plants in the following years.

The capacities of both the plants are overlooked during the season. The

company made record production of 17000 M.T of Mango products in 3

Months (1000 FCLs) which is the highest ever achieved in the around 32%.

RAW MATERIAL SOURCING

VARMA INTERNATIONAL (P) Ltdsources its raw materials from the best

growing areas of the products in India. These areas such as Chittoor, Cudappah,

Nashik, Valsad, Ratnagiri, Vijayawada etc are known around the world for their goodraw material quality produce.

VARMA INTERNATIONAL (P) Ltd has also strategically located its

production areas, in and around the growing areas so that the best pick of the season

can be used for manufacturing our products.

For more information, please refer the map below. The interactive map allows you to

identify the growing areas by the moving the cursor over the product name.

Market Presence

European Union

United States of America

Canada

Australia

Middle East including Iran & North Africa

Japan & South Korea



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Export Market

The company manufactures and exports mango pulp, guava pulp, papaya

products, canned vegetable and also exports frozen pulp vegetables.

The company has than 50% share of mango product imports into UK,

Holland, Germany, France and japan. These are very desirable markets because the

imports are some of the largest Companies in the world in Fruit and Dairly business.

For eg. Our key group (Largest fruit juice Company in Europe), Freisland group

(largest and the fastest growing dairy and Bakery Product Company in Europe)

Boirron (Largest Ice-Cream manufacturing Company in France) Rubicon (Largest

Tropical Juice Company in UK), Sumitomo, Mitsui and O will in japan.

Domestic Market

In the previous year the company is made contract 3000 MT of mango pulp

supply coke. In the current year also the same contract will continue with additional

volume.

The company also manufactures Egg Powder Tomato Powder, Caramel

Powder, orange Powder and other fruit powders. The major customers are MNCs like

Nestle, Britiania, CPC, Glaxo, Heinz and reputed Indian Companies like Parle, Dabur

etc.

Primary Focus

Company philosophy incorporates and uncompromising commitment to

quality, while emphasizing continuous innovation and strong service

orientation.

Process monitoring and control is per Good manufacturing Practices (GMP)

and meets not only client specification but also food safety requirements,

while packaging standards.



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Commitment to environment

The Company is committed to being eco-friendly and the fist one to start

processed fruit export division

Contract cultivation using chemical free fertilizer and pesticide is encourage,

while bio-degradable materials are used wherever possible and plant waste is

recycled.

BANKING FACILITIES

The consortium is made up of Andhra Bank (lead bank), State Bank of India,

Bank of Maharashtre and Export Import Bank of India. Apart form availing

working capital consisting of Per-shipment and Post-shipment limit the company also

availed Term Loan form SBI, Bank of Maharashtre and EXIM for capital

expenditure. Major portion of credit facilities is in Foreign Currency.

FUTURE PLANS

Development of the Indian market for foods and inns.

Thrust of exports.

Expansion in 4th Aspectic manufacturing capacity.

Use of IT as a tool to further Business goals.

Setting up of a Central R&D lab.

Backward integration form improved quality of raw materials using contracti

farming/organic cultivation.

CUTTING EDGE TECHNOLOGY

VARMA INTERNATIONAL (P) Ltd plant is equipped with state-of-the-art

fruit puree processing aseptic filling line of SIG- Mizzen, Italy to produce natural

fruit pulps & concentrates. The plant has one of the India's single largest fruit

processing lines -10 TPH ripen fruit processing with Aseptic Packaging.

INITIATIVES SPAN THE FOLLOWING DISCIPLINES



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PLC operated equipments for better control over monitoring and operations

with supervisory units.

Two stage washing of fruits to ensure HACCP quality requirement.

Two-stage sterilization to retain the natural flavor and aroma.

High speed advanced Mono block aseptic filling machine supplied by SIG

Mizzen.

Integrated Enterprise Resources Planning system is in place to automate

business processes and provide data for analysis and reporting, allowing a

closer control on quality and operations.

EFFICIENT PLANT LAYOUT

Minimal drop in power and steam transfer.

Straight-line process flow design to maintain the hygiene and control in

respective areas.

Special food grade self-leveling epoxy flooring to maintain optimum hygienic

conditions.

Curved corners and food grade epoxy painted walls to avoid dust

accumulation and to facilitate easy washing.

Advanced high raise insulated roofing with double layer GI Sheeting with air

extractors to maintain temperature inside the plant.

VALUABLE INDUSTRIAL EXPERTISE

VARMA INTERNATIONAL (P) Ltd is backed with strong support and

service from its team of highly qualified technical personnel and domain experts withperceptive knowledge and skill. Powered by priceless hands-on experience these

professionals are upgrading themselves continuously to identify and introduce

improved and innovative product offerings that would delight customers worldwide

and comply with the leading global quality standards.

PUREE & CONCENTRATE FACILITY



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The fruit processing aseptic line is from SIG-Mazzini of Italy. The line has a

capacity to process 10 metric tones per hour ripened fruits. The processing line is

fully integrated and controlled by PLC.

PACK HOUSE

VARMA INTERNATIONAL (P) Ltd has a set up a Fresh fruit and Vegetable

processing facility from Grief, Spain. Fresh fruits including mangoes, bananas are

processed along with tropical vegetables like Okra, Egg plant, Lemon, Bitter gourd

etc. The facility also holds ripening chambers, pre cooling chambers and cold storage

to handle fresh fruits and vegetables.

VAPOUR HEAT TREATMENT

To enable Fresh Mango exports to countries like Japan and Korea, VARMA

INTERNATIONAL (P) Ltd has commissioned the VHT facility. This ensures

irradiation of the fruit flies in the fresh fruit. VARMA INTERNATIONAL (P) Ltdis

the first private organization to set up this facility in the country.

WATER MANAGEMENT

Water is an essential & precious natural resource. It is a natures gift. Without

water there is no life on the earth. It is as important to the fruit processing industry as

to the living being. But, water is becoming scarce year by year due to increase n its

consumption in industries & agriculture sectors & indiscriminate use /wastage by

Human beings, therefore, it needs a integrated& scientific approach for its

management to use it so that undesirable wastage is avoided which helps us to save

water for right utilization.

STAGE OF USE OF WATER TO THE BEST EFFECT IN OUR

FACTORY

Our main source of water is bore wells. The water is potable. Water from all bore

wells is collected in a sump. From there it is pumped to overhead tank to supply to



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various locations of use. To manage appropriately & conserve the water, we are

taking following steps at various locations of its use

FRUIT WASHING

The water is re-circulated after filtration up to it becomes dirty. This water is

chl0rinated to control the contamination by continuous dosing of chlorine in the

washing tub.

STEAM GENERATION

Water for boiler feeding is treated in water softener to reduce the hardness. The steam

condensate of evaporator is recycled to boiler to save water & energy as condensate

will have high temperature.

THE BEST EFFECT IN OUR FACTORY

Steam condensate from other heating equipments & Vapors condensate from

pulp concentration is collected in a tank to use in crate & floor cleaning.

Floor & equipments are cleaned by compressed water jet to conserve the

water.

Treated effluent is used for civil construction & gardening.

Flow meters are installed at location of major use to have control over water

utilization.

UV sterilizer is installed on main line of water, which feed to processing to

sanitize the water.

The water to be used for blending in product is treated in r o plant.

Drinking water is passed through zero-b filter.

WASTE MANAGEMENT

Our factory is equipped with aerobic effluent treatment plant of 250 kl

capacity. Effluent from all locations of water use is collected through inter connected

drains in ET plant. It is aerated here & transferred to settlement tank for

sedimentation of solid particles. The treated effluent is sent to oxidation pond. From

pond, water is used for gardening & civil construction. The sludge is transferred to



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drying bed. The dried sludge is used as manure in our garden. The main feature of our

company is that no effluent treated or untreated is released in public drains &

therefore, does not pose any danger to surrounding environment & public.

SOLID WASTE MANAGEMENT

Seeds of fruits

Stem ends & skin/peel of fruits & vegetables

Pumice-consists of fibbers & embedded pulp.

Spoiled fruits & vegetables

The seeds & peels of good fruits are passed second time through a pulped to

remove the remaining pulpy portion. The pulp extracted so & pumice are mixed &

given an enzymatic treatment & centrifuge to remove the extraneous materials so that

pulp can be used for making concentrate. This helps in improving the recovery out of

fruits.

CERTIFICATIONS OF INTERNATIONAL QUALITY STANDARDS

FIL's quality and business objectives are designed to challenge the

organization through continual improvement and a zeal for results. At FIL quality

determines not only the end product but processes and operations at all levels. The

company's laboratory is equipped with the latest testing facilities to perform all

necessary tests. Frequent & stringent quality checks are carried out for Physical,

Chemical, Organoleptic & Microbial parameters and immediate corrective measures

are carried out on detection of variance in parameters, assuring a high quality end

product. As a mandatory procedure, all finished products are analyzed with extremecare before clearance by FIL's quality assurance staff.

OUR CERTIFICATIONS INCLUDE

Haccp (food safety certification) by tuv, germany

iso 9001:2000 (quality management system) by tuv, germany

kosher by star-k, usa

http://www.gallafoods.com/downloads/tuv-certificate.pdfhttp://www.gallafoods.com/downloads/iso9001.pdfhttp://www.gallafoods.com/downloads/star-k-koesher-certificate.pdfhttp://www.gallafoods.com/downloads/star-k-koesher-certificate.pdfhttp://www.gallafoods.com/downloads/tuv-certificate.pdfhttp://www.gallafoods.com/downloads/iso9001.pdfhttp://www.gallafoods.com/downloads/star-k-koesher-certificate.pdf


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sure global fair (sgf)

halal certification

MANGO PULP INDUSTRY HOPES

Mango pulp production to reach 75,000 tones by 2010

Mango is raised in 36,000 hectares in Krishna Giri district

Mango pulp processed annually is 50,000 tones

Farmers have to go to Bangalore, as there is no testing facility in Krishnagiri

Farmers are not getting fair price, even if there is a rise in prices in global

market

CUSTOMER FOCUS

Loyalty and a strong relationship in business are built out of years of

experience in a particular industry. VARMA INTERNATIONAL (P) Ltd expertise in

the business and its contacts with Agents\Brokers, Blender-bottlers, End User, Off-

shore logistical service providers has made the supply chain process extremely

competitive. Given our renewed emphasis on this product line we are strengthening

relationships in key markets across the buyer spectrum, understanding unique

requirements and delivering value to select global customers.

PRODUCT PROFILE

Aseptic

o Mango Purees and Concentrates

Alphonso Mango Puree

Totapuri Mango Concentrate

Totapuri Mango Puree

Kesar Mango Puree

Raspuri Mango Puree

http://www.gallafoods.com/downloads/sgf-certificate.pdfhttp://www.gallafoods.com/downloads/sgf-certificate.pdfhttp://www.gallafoods.com/downloads/halal.pdfhttp://www.gallafoods.com/downloads/sgf-certificate.pdfhttp://www.gallafoods.com/downloads/halal.pdf


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White Guava Puree and Concentrates

White Guava Puree

White Guava Concentrate

Pink Guava Puree

Red papaya Puree and Concentrate

Papaya Puree(Red, Natural)

Papaya Concentrate(Red , Natural)

Canning

Fruits Purees And Slices

Alphonso Mango Puree

Alphonso Mango Slices in Brine

Sweetened Alphonso Mango Puree

Totapuri mango Puree

Kesar Mango puree

Sweetened Kesar mango Puree

Raspuri Mango Puree

Vegetables in Brine

Pickles And Chutneys

Curried Patra

Frozen

Fruits

Natural Alphonso Mango Pulp/Puree

Natural Alphonso Mang Slices

Natural Totapuri Mango Pulp/Puree

Sweetened Totapuri mango Pulp/Puree

Natural White Guava Pulp/Puree

Sweetened Guava Pulp/Puree



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Purees and Chincks

Natural Alphonso Mango Chunks

Natural Alphonso Totapuri Chunks

Vegetables

Parwar

Tinda

Turia (Ridge Guard)

Methi

Aubergine (Brinjal)

Valpapdi

Drumstrick

Tindora (Ivy Guard)

Tuvar Liva

Dudhi (Bottle Guard0

Okra (Bhindi)

Papadi Liva (Liva Beans)

Karela (Bitter Guard)

Guar

Snacks & Chutneys

Punjab Samosa

Peas & Panner Samosa

Mixed Vegetable Samosa

Tomato Chutney

Coriander Chutney

SCOPE OF THE STUDY

The main purpose of the study was to analyze the effectiveness of flow offunds in VARMA INTERNATIONAL (P) Ltd



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The prevalent educational system providing the placement training at an

industry being a part of the curriculum has helped in comparison of theoretical

knowledge with practical system. It has led to note the convergences and divergence

between theory and practice.

The study enables us to have access to various facts of the organization. It helps in

understanding the needs, importance and advantage of funds in the organization. The

study also helps to exposure our minds to the integrated funds flow management, the

various procedures, methods and technique adopted by the organization. The study

provides knowledge about how the theoretical aspects are put in the organization.

Hence, the study enables us to get a practical experience of what we study

theoretically in the books and class room, lecture.

NEED OF THE STUDY



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To know the financial stability and efficiency of financial policies of the

management.

To know where the profits are gone.

To know how much funds are gathered through normal business process.

To know what are the sources through which liabilities will be repaid.

To know how management is going to utilize the funds on the basis of funds

flow statement.

To know the sources from which the company has obtained its funds.

To know the factors which results in change in working capital.

IMPORTANCE OF THE STUDY



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The project work is carried out by me in VARMA INTERNATIONAL ,The

aim of project is to analyze the funds flow analysis of the company For a better

understanding of the enterprise it is essential to identify movement of funds during

the year and their consequent effect on its financial position. This information is made

available in the statement of change in financial position.

The funds flow statement provides an analysis of changes in the firms

working capital position. Funds flow statement is also known as statement of sources

and application of funds or management of funds statement

OBJECTIVES OF THE STUDY



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The primary objective of the study is to evaluate the financial position of VARMA

INTERNATIONAL .

To asses the present profitability and operating efficiency of

VARMA INTERNATIONAL as a whole as well as for it different

departments.

To find out relative importance of different components of the financial

position of the firm through funds flow analysis.

To identify the reasons for change in the profitability financial position of the

firm.

To asses how effectively the company is using its resources.

To offer suggestions for improvement in relevant aspects.

To make overall view on the theoretical approach of funds flow analysis.

LIMITATIONS OF THE STUDY



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The study is based on the past five annual reports of the REGENCY

CERAMICS LTD.

The study mainly has been carried out based on the secondary data i.e.,

financial statements. The time given to complete this project is very limited.

The funds flow are generally calculated from the post financial statement and

as show they are not the indications of future.

The Analysis is made from the information given by an organization.



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REVIEW OF LITERATURE


INTRODUCTION

The basic financial statement i.e., the balance sheet and profit and loss account (or)

income statement of business, reveal the net effect of the various transaction on the

operational and financial position of the assets and liabilities of an undertaking at

particular point of time. It reveals the financial status of the company. The assets side

of a balance sheet shows of the deployment of resources of an undertaking while the

liabilities side indicates its obligation 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. It contains a summary of expenses incurred and the revenues

realized in a accounting per od. Both these statement provide the essential basic

information on the financial activities of a business. The balance sheet give a static

view of the resources (liabilities) of a business and uses (assets) to which these

resources have been but at a certain point of time. It does not disclose the cause 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 prepare 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 statements.

The funds flow statement in a statement which shows the movement of funds and a

report of the financial operations of the business undertakings. It indicates various

cans by which funds were obtained during a particular period and the way to which

these funds were employed. In simple words. It is a statement of sources and

applications funds.

MEANING AND CONCEPT OF FUNDS:



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The term Funds has variety of meanings. There are people who take it synonyms to

cash and to them there is no difference between a Funds Flow statement and cash

flow statement.

While others include marketable securities besides cash in the definition of the term

funds.

The term funds has been defined in a number of ways.

a) In a narrow sense, it means cash only and a funds flow statement prepared on

this basic is called a cash flow statement such a statement enumerates net

effects of various business transactions in cash and takes into account receipts

and disbursements of cash.

b) In a broader sense the term funds refers to money values in whatever form it

may exist. Here funds means all financial resources used in business whether

in the form of men, material , money, machinery and other.

c) In a popular sense the term funds means working capital i.e., the excess of

current assets over current liabilities, the working capital concept of funds has

emerged due to the fact that total resources of business are invested partly in

fixed assets in the form of fixed capital and partly kept inform of liquid or

hear liquid form as working capital.

The statement can be classified into four:

1. Income statement

2. Funds Flow Statement

3. Statement of changes in financial position

4. Cash Flow statement.

1. Income Statement: As already indicated in an earlier chapter then an income

statement measure the inflow of assets resulting from rending of gods or services

customers over a period of time.

2. Funds Flow Statement:



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The statement measures the inflows and the out flows of working Capitals that results

from any type of business activity.

3. Statement of changes in financial position:

This statement has wider meaning than Funds Flow statement. It measures changes

both in Working Capital and non-Working Capital.

4. Cash Flow statement:

The statement measures in flows and the out flows of cash on account of any type of

business activity.

MEANING AND CONCEPT OF FLOW OF FUNDS:

The term flow means movement and includes both inflow and outflow the term

flow of funds means transfer of economic values from one assets 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. If 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. Further, in

case the transaction does not change funds. It is said to have not resulted in the flow

of funds. According to the working capital concept of funds, the term flow of funds

refers to the movement of funds in the working capital. If any transaction results in

the increase in working capital it is said to be a source or inflow of funds and it results

in decrease of working capital, it is said to be an application or outflow funds. In

simple language funds move when a transaction affects.

1. A current assets and a fixed assets, or

2. A fixed and a current liability.

3. A current assets and a fixed liability.

4. A fixed liability and current liability.

And funds do not move when the transaction affects fixed assets and fixed liability or

current assets and current liabilities. Kenneth medley and Ronald Gibers define the



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term funds as one used in the sense of spending power, it refers to the value

embedded in assets. According to Bonneville and Dewey

funds constitute the prime importance in sharing and operating any business

enterprise. In the ordinary parlance. Funds mean cash only, but it has got several

different concepts as mentioned below.

Funds may mean:

a. Cash only

b. Net working capital i.e., current assets less current liabilities.

c. Total resources or total funds.

d. Internal resources only.

e. Net worth i.e., owners equity capital plus reserves.

WORKING CAPITAL:

There are 2 concepts in Working Capital

Gross Working Capital

Net Working Capital

Gross Working Capital refers to the firms investment in current assts while the term

net Working Capital means excess of current assets over current liabilities

i.e., Gross Working Capital = Total Current Assets

Net Working Capital = Current Assets Current Liabilities.

CURRENT AND NON-CURRENT ACCOUNTS:

To understand flow of funds it is essential to classify various accounts and balance

sheet items current and non-current categories. Current accounts can either be current

assets or current liabilities. Non current accounts can either be non-current assets or

non-current liabilities.



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Current Assets:

Current assets are those assets which in the ordinary course of business can be or will

be converted into cash with in a short period of normally one accounting year.

Definition according of Glady:

For accounting purpose , the term Current Assets is used to designate cash and other

assets or resources commonly identified as those which are reasonable expected to be

realized in cash or sold or consumed during the normal operating cycle of the

business.

The Current Assets are:

Cash including fixed deposit with banks.

Accounts receivable.

1) Trade Debtors

2) Bills Receivable.

Inventory.

1) Raw material

2) Work in Progress.

3) Finished Goods.

4) Stores and spare parts.

Advances recoverable i.e., the advances given to supplier of goods and

services or deposit with government or other public authorities.

Prepaid expenses.

Current liabilities are those liabilities which are intended to be paid in the ordinary

course of business within a short period of normally one accounting year out of the

current assets or the income of the business. Current liabilities are



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Accounts payable i.e.

Bills payable

Creditors

Outstanding expenses i.e., expenses for which services have been received by

the business but for which the payment has not been made.

Bank Overdraft

Short term loans i.e., Loans from Banks.

Advanced payments received by the business for the service to be rendered or

goods to be supplied in future.

Current maturities of long-term i.e., long-term debts due within a year of the

balance sheet date.

Non- Current Assets:

All assets other than current assets come within the category of non-current assets.

Such assets including

Goodwill

Land &Building

Machinery

Furniture

Long-term investments

Payments rights

Non Current Liabilities:

All liabilities other than current liabilities come within the category of Non-

current assets.

General reserves.

Dividend equalization

Debentures sinking fund

Capital redemption reserve.



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FUND FLOW ANALYSIS

The purpose of measuring trading performance, operational efficiency,

profitability and financial position of a concern revealed by trading Profit and loss

Account and balance Sheet. These financial statements are prepared to find out the

Gross profit or Gross Loss, Net profit or Net Loss and financial soundness of a firm

as a whole for a particular period of time. From the management point view, the

usefulness of informations provided by these income statements functions

effectively and efficiently. In the true sense they do not disclose the nature of all

transactions. Management, creditors and investors etc. want to determine or

evaluating the sources and application of funds employed by the firm for the future

course of action. Based on these backgrounds, it is essential to analyze the movement

of assets, liabilities, funds from operations and capital between the components of

two years financial statements. The analysis of financial statements helps to the

managements by providing additional information in a meaningful manner.

MEANING OF FUND

The term Fund refers to cash, to cash Equivalents or to working capital and all

financial resources which are used in business.

In a broader meaning the word Fund refers to working capital. The working capital

indicates the difference between current assets and current liabilities. The term

working capital may be:

1. Gross Working Capital and

2. Net Working Capital

Gross Working Capital represents total all current Assets.

Net Working Capital refers to excess of current Assets over Current Liabilities.

In a narrow sense the world Fund denotes cash or to cash equivalents.

MEANING OF FLOW OF FUNDS

The term Flow of Funds refers to changes or movement of funds or changes in the

working capital in the normal course of business transactions takes place. The change

in working capital may be in the form of inflow of working capital or outflow of

working capital.The following chart shows the movement of funds:



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MOVEMENT OF FUNDS

Inflow Funds Outflow Funds

The following chart explains the flow of funds when transaction involves between

current and non-current.

FLOW OF FUNDS CHART

Transaction involves between

COMPONENTS OF FLOW OF FUNDS

In order to analyses the sources and application of funds, it is essential to know the

meaning and components of flow of funds given below:

1. Current Assets

2. Non-current Assets (Fixed or Permanent Assets)

3. Current Liabilities4. Non-Current Liabilities (Capital & Long Term Liabilities )

5. Provision for Tax

6. Proposed Dividend.

CURRENT ACCOUNTS

Current Liabilities Current Assets1) Bills Payable

2) Sundry Creditors

1) Cash in hand

2) Cash at Bank


Firm

BusinessTransaction

Current AssetsAnd

-

Current AssetsAnd

-

Current LiabilitiesAnd

Non-Current Assets

Current LiabilitiesAnd

Non-Current Liabilities

Flow of Funds

(Inflow or Outflow of Funds)


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3) Outstanding Expenses

4) Dividends Payable

5) Bank Overdraft

6) Short Term Loans

7) Provisions against Current Assets

in Progress & Finished Goods

8) Provision Dividend

(May be Current or Non-Current

Liabilities)

3) Bills Receivable

4) Sundry Debtors

5) Short Term Investments

6) Marketable Securities

7) Stock of Raw Materials. Work

8) Prepaid Expenses

9) Accrued Incomes

NON-CURRENT ACCOUNTS

Non-Current or Permanent Liabilities Non-Current or Permanent Assets

1) Equity Share Capital

2) Preference Share Capital

3) Debentures

4) Long Term Loans

5) Share Premium

6) Share Forfeited

7) Profit and Loss Account8) Capital Reserve

9) Capital Redemption Reserve

1) Good will

2) Land

3) Building

4) Plant and Machinery

5) Furniture and Fittings

6) Trade Marks

7) Patent Rights8) Long Term Investments

9) Discount on Issue of Shares and

Debentures

10) Preliminary Expenses

11) Other Deferred Expenses

IMPORTANCE OF FUNDS FLOW STATEMENT

Fund Flow Statement is prepared for financial analysis in order to meet the needs of

people serving the following purposes.

1. It highlights the different sources and application or uses of funds between the

two accounting period.

2. It brings into light about financial strength and weakness of a concern.

3. It acts as a effective tool to measure the cases of changes in working capital.

4. It helps to the management to take corrective actions while deviations

between tow balance sheet figures.



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5. It is an instrument used by the investors for effective decisions at the time of

their investment proposals.

6. It also presents detailed informations about profitability, operational

efficiency and financial affairs of concern.

7. It serves as a guide to the management to formulate its dividend policy,

Retention policy and investment policy etc.

8. It helps to evaluate the financial consequences of business transactions

involves in operational financial and investment.

9. It gives the detailed explanation about movement of funds form different

sources or uses of funds during a particular accounting period.

LIMITATIONS OF FUNDS FLOW STATEMENT

Fund Flow Statement has suffered with the following limitations:

1. It is prepared on the basis of information related to historical in nature. It

ignores to project future operations.

2. This statement does not focus on transactions involves in non-fund items.

3. It is also ignores when transactions involves between current accounts or non-

current accounts.

4. It does not provide any additional informations to the management because

financial statements are simply rearranged and presented.

PREPARATION OF FUNDS FLOW STATEMENT

Fund flow analysis involves the following important three statements such as :

i. Fund from operations

ii. Statement of changes in working capital

iii. Fund flow statement

b. Fund flow Operations: Fund from operation is to be determined on

the basis of profit and loss account. The operating profit and loss

Account. The operating profit revealed by profit and loss Account is

represent the excess of sales revenue over cost of goods sold.

CALCULATION OF FUND FROM OPERATIONS:



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Fund from operations is calculated with help of following adjustments are to

be made. The adjustments may be shown in the specimen proforma of profit and loss

account is given below:



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PROFORMA OF PROFIT AND LOSS ACCOUNT

Alternative specimen format: the following is the specimen of adjusted P/L A/C.

Particulars Amount

R s.

Particulars Amount

R s.

To Depreciation on Fixed

assets

To loss on Sale of Fixed

Assets

To Loss on Sale investments

To Good will Written off

To Discount on shares written

off

To Transfer to reserve

To preliminary expenses

written off

To Provision for Tax

To proposed Dividend

To Closing balance of P & LA/c

By Opening balance of P & L

A/c

By Profit on sale of Fixed

Assets

By Excess provision written

back

By Dividend received on

investment

By Revaluation of fixed assets

By Fund From Operations

(Balancing Figure)*** ***


Particulars Amount Rs. AmountRs.

Net profit or retained Earnings

(closing balance of p & L A/c as givenin the Balance sheet)Add: Non-Fund and Non-operating items which have already

been debited to p & L A/c:1) Deprecation and Depletion2) Amortization of Fictions and Intangible Assets etc.(a) Good will, patents written off

(b) Discount on Issue of shares written off (c) Preliminary Expenses written off (d) Premium on red emption of debenture3) Appropriation of Retained Earnings:Profit transfer to General ReserveProfit transfer to Sinking FundProfit transfer to ContingencyProvision for Taxation (not taken as current liability)Provision for Proposed Dividend

(not taken as current liability)Loss on sale of Fixed Assets

Loss on sale of Plant and machineryLoss on sales of land BuildingLoss of sale of Furniture and Fixtures

Total (A)Less: Non-Fund and Nom-operating items which have

Already been credited to P & L A/c:(1) Profit on sale of Fixed Assets

Profit on sale of land & BuildingProfit on sale of Plant & machineryProfit on sale of Furniture & Fixtures

(2) Appreciation or Revaluation of fixed assets(3) Dividend received on investment

(4) Profit on redemption of Shares and Debentures(5) Excess provisions written back(6) Any other non trading items already

Credited to P & L A/c(7) Net Profit or Retained Earnings

(Opening balance of p & L A/c)

Total (B)

Fund From Operations (Total A-B)

***

***

***

***

***

***

***

************

***

***

***

***

***

***


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STATEMENT OF CHANGES IN WORKING CAPITAL

INTRODUCTIONIn order to maintain from operations, every firm needs certain amount of current

assets. For example, funds required either to pay for expenses or to meet obligations

for service received or goods purchased etc by a firm. These funds are known as

working capital. Working capital is also known Circulating Capital, Fluctuating

Capital and Revolving Capital.

DEFINITION

Working capital is defined as the excess of current assets over current liabilities and

provisions. According to shubin working capital is the amount of funds necessary

for the cost of operating the enterprise.

NEED FOR WORKING CAPITAL

Working capital is significant because of:

1. adequate working capital is required to continue uninterrupted business

operations

2. It is essential to run the day business activities

3. Greater volume of working capital required to invest in current assets for the

success of sales activities

4. To ensure the maximizing the wealth of the firm

5. To enable to increase the rate of return on enterprise

6. To meet the short-term obligations of a business enterprise

7. To increase the operational efficiency of a firm

8. To utilize the maximum available resources

9. To earn considerable profits

Types of working capital

The working capital admits the following broad classifications:

1. Gross Working capital

2. Net Working Capital

3. Positive net working capital



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4. Negative net working capital

5. Permanent working capital

6. Temporary working capital

7. Balance sheet working capital

8. Cash working capital

Reasons for changes in working capital:

The changes in the level of working capital occur for the following reasons:

1. Changes in the level of sales activities.

2. Changes in the level of operating expenses.

3. Policy changes initiated by management.

4. Technological changes.

5. Cyclical changes in the economy.

6. Changes in operating cycle.

7. Source of change is seasonality in sales activity.

8. Changes in the fixing the level of inventory and receivables.

Determinents of working capital

The total working capital requirement is determined by a variety of factors. It should

be, however, noted that these factors affect different enterprises differently. The

following is the description of the factors which generally influence the working

capital requirements of the firms.

A. Internal factors:

B. Nature of Enterprise.

C. Size of Business.

D. Manufacturing Cycle.

E. Firms Credit policy.

F. Access to Money Market.

G. Expansion and Growth of Business.

H. Profit Margin and Dividend Policy.



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I. Depreciation policy.

J. Operating Efficiency of Firm.

K. External factors:

1. Business Cycle Fluctuations

2. Technological Development.

3. Seasonal Fluctuations.

4. Environment Factor.

5. Taxation policy.

WORKING CAPITAL STATEMENT

Before preparation of fund flow statement, it is essential to prepare the

schedule of change in working capital. Statement of changes in working capital is

prepared on the basis of items in current assets and current liabilities of between two

balance sheets.

This statement helps to measure the movement or changes of working capital during a

particular period. The term working capital refers to excess of current assets overcurrent liabilities. The working capital may be Increase in working capital or

Decrease in working capital. An increase in the amount of an item of current assets

in the current year as compared to the previous year represents to an increase in

working capital. Similarly, a decrease in the amount of an item of current year as

compared to the previous year would represent decrease in working capital. In the

same way over all changes in working capital is calculated and presented in the

schedule of changes in working capital. The final result of net Decrease in WorkingCapital refers to Source of funds or Inflow of Funds. Like this, Net Increase in

working Capital represents Application of Fund or Uses of Funds.

PRINCIPLE OR RULES FOR PREPARATION OF WORKING

CAPITAL STATEMENT

The following rules may be kept in mind while preparing working capital statement.



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1) Increase in current Asset Increase working capital

2) Decrease in current Asset Decrease working capital

3) Increase in current Asset Decrease working capital

4) Decrease in current liability Increases working capital

FUND FLOW STATEMENT

After preparing schedule of changes in working capital and fund from operations, at

the last stage a comprehensive fund flow statement can be prepared on the basis of

component of non-current liabilities of balance sheet and relevant information.

The following is a specimen form may be used for preparation of schedule of changes

in working capital.

Statement of changes in working capital

Particulars Previous

Year

R s.

Current

Year

R s.

Effect on working capital

Increase Decrease

Current Assets:

Cash in Hand

Cash at Bank

Sundry Debtors

Bills Receivable

Short term Investment

Stock

Prepaid Expenses

Outstanding Incomes

* * *

* * *

* * *

* * *

* * *

__

____

* * *

* * * * * *



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Total Current Assets

(A)

Current Liabilities:

Sundry Creditors

Bills Payable

Bank Overdraft

Outstanding Expenses

Short Term Loans

Total Current

Liabilities (B)

Working capital

(A-B)

Net Increase/Decrease

in working Capital

Total

***

* * *

___

* * * * * ** * * * * *

Components of Sources and Application of Funds

The following are the components different sources and applications of funds

presented below:

1. Fresh Issue of Equity Share Capital

2. Fresh Issue of preference Share Capital

3. Issue of Debentures and Bonds

4. Long Term Loans raised from bank, financial institutions and public

5. Long Term Loans on mortgage

6. Sale of fixed Assets

7. Sale of Long Term investments

8. Non-Trading Incomes

9. Fund From Operations



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10. Net Decrease in working capital (as per schedule of changes in working

capital)

Components of Applications of Funds

Generated funds from various sources may be utilized this funds in the followingways for meeting the future productive programmes of the business.

1. Redemption of shares and Debentures

2. Repayment of Loans raised from bank, financial institutions and public

3. Purchase of Fixed Assets

4. Purchase of Long Term Investment

5. Non-Trading Expenditure

6. Payment of Tax

7. Payment of Dividend

8. Fund Lost in Operations

9. Net increase in working capital (as per schedule of changing in working

capital)

Specimen form of Fund Flow Statement

The following are two usual formats for preparation of sources and Application of

Fund is presented below.

1. Statement Form

2. Account Form

Account Form

Fund Flow Statement

Sources of Funds Amount

R s.

Application of Funds Amount

R s.



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Fund From Operations

Issue of share Capital

Issue of Debentures

Long Term Loans

Sale of Fixed Assets

Sale of Investments

Non-Trading Incomes

Decrease in Working Capital

(As per schedule of changes

In working capital)

Total Inflow

***

***

Fund lost in Operations

Redemption of shares

Redemption of Debentures

Purchase of fixed Assets

Repayment of Long Term Loans

Non-Trading Expenditure

Payment of Tax

Payment of Dividend

Increase in Working Capital

(as per schedule of changes

In Working capital)

Total outflow

***

***

*** ***

Fund flow statement



component of non-current liabilities of balance sheet and relevant information. In

other words this statement is prepared with the help of the changes in non-current

liabilities of balance sheet.

Fund flow statement



component of non-current liabilities of balance sheet and relevant information.

STATEMENT FORM FUND FLOW STATEMENT



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Particulars

Sources of funds:

Fund Flow Operations

Issue of Share Capital

Issue of Debentures

Long Term Loans

Sale of Fixed Assets

Sale of Investments

Non-Trading Incomes

Decrease in Working Capital

(as per schedule of changes in working capital)

Total sources (or) Total inflows (A)

Application or Uses of Funds:

Fund Lost in operations

Redemption of shares

Redemption of Debentures

Purchase of Fixed Assets

Repayment of Long Term Investments

Non-Trading Expenditure

Payment of Tax

Payment of dividend

Increase in Working capital

(as per schedule of changes in working capital)

Total Application or total Outflows (B)

Amount

Rs.

***

***

Amount

Rs.

***

***

***

*** ***

***



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RESEARCH METHODOLOGY

Research Design

To analyze the working capital, trends and for the purpose of ratio analysis,

Financial Analysis has to be carried out. Financial analysis is the analysis and

interpretation of financial statements and a proper financial analysis can give the users

better insight about financial strengths and weakness of the firm. Financial analysis is

the starting point for making plans, before using any sophisticated forecasting and

planning procedure.

For the purpose first the required information has to be collected like for ratio

analysis and owing capital management analysis, income statements, trading and

profit and loss accounts, balance sheet, funds flow statement, etc. are to be collected

the, the data in the statements is to be properly organized and arranged and then

relationship is established between financial statements and finally conclusions are

drawn from the interpreted information and presented in the form of reports.

Research Methodology

Research involves getting tools, ideas from texts, journals, books, records,

Websites. The collection of data is an important aspect of Research.

The sources of information fall under two categories.Internal Sources

Every company keeps certain records such as accounts, records, reports, etc.

These records provide sample information for research.

External Sources

When internal records are insufficient and required information is not available

the organization the organization depends on eternal sources.

The external sources of data are:

Primary Data

Secondary Data



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TABLE 1

STATEMENT SHOWING CHANGES IN WORKING

CAPITAL2006-06

Rs. In Lakhs

Particulars 2006(Rs.) 2003(Rs) Increase Decrease

Current Assets:-

Sundry Debtors 3849.09 4333.89 484.8 -

Cash on Bank 3227.02 2620.87 - 606.15

Other Current Assets 117.54 144.56 27.02 -

Loans & Advances 935.06 900.81 - 34.25

Total 9108.15 9054.12 -

Current Liabilities:-

Liabilities & Provision 2853.28 3216.35 - 363.07

Total 2853.28 3216.35 0 0

Working Capital CA-CL 6254.87 5837.77 - -

Decrease in Working Capital 417.1 417.1

6254.87 6254.87 1003.47 1003.47

INTERPRETATION

There is a net decrease in Working Capital due to decrease of current assets in

inventories, cash on bank.

Sundry debtors, loans and advances are increase position .

Company has the increase inventory due to increase in production demand.

TABLE 1.1



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FUNDS FLOW STATEMENT FOR 2006-2007

Rs.In Lakhs

Sources of fund Sources of fund Sources of fund Sources of fund

Share Capital 1359.68 Investments 211.53

Reserves 5262.91 Fixed Assets 14534.19

Secured Loans 11643.49 Miscellaneous Expenditure 101.02

Unsecured Loans 288.96 Net Current Assets 5837.77

Deferred Tax

Liabilities 2129.47

Decrease in Working

Capital 4171.1

20684.51 20684.51

INTERPRETATION:-

In current asset of Loans and advances has appreciation to Rs.34.25 Lakhs and

current liabilities & Provisions of current liabilities has been decreased

Rs.363.07 Lakhs.

During the year the company in borrowings taken secured loans Rs.11643.49

Lakhs. The huge amount invested in assets Rs. 14534.19 lakhs.

TABLE 2



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CAPITAL2007-07

Rs. In Lakhs

Particulars 2007(Rs) 2008(Rs) Increase Decrease

Current Assets:-

Inventories 4333.89 5010.35 676.46 -

Sundry Debtors 2620.87 3378.97 758.1 -

Cash on Bank 1054 845.93 - 2081.07

Other Current Assets 144.5 189.3 44.8 -

Loans & Advances 900.81 752.22 - 148.59

Total 9054.13 10176.77 - -


Liabilities & Provision 3216.35 3900.9 - 684.55

Total 3216.35 3900.9 - -

Working Capital CA-CL 5837.78 6275.87 - -

Increase in Working Capital 438.09 438.09

6275.87 6275.87 1479.3 1479.3

INTERPRETATION:

There is a increase in working Capital due to increase of current assets in

inventories , sundry debtors .

In the inventories (Raw materials ,packing materials ,work in process, finished

goods, stores, spares and consumables , materials in transit, tools and

implements.)

In this year the situation is reversed that means currents assets are increased

and current liabilities are increased. In this year the company has the

increasing inventory due to increase production demand.

TABLE 2.1


Rs.In Lakhs



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Sources of fund Sources of fund Sources of fund Sources of fund



Secured Loans 11326.44 Miscellaneous Expenditure 77.25


Deferred Tax

Liabilities 1895.45

Increase in Working

Capital 438.09

20293.05 20293.05

INTERPRETATION:-

In current asset of Loans and advances has depreciation to Rs.148.59 Lakhs

and current liabilities & Provisions of current liabilities has been increased

Rs.684.55 Lakhs.



TABLE 3


CAPITAL2008-08

Rs. In Lakhs



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Particulars 2008(Rs) 2009(Rs) Increase Decrease

Current Assets:-

Inventories 5010.34 4390.10 620.24

Sundry Debtors 3378.97 2596.89 782.08

Cash on Bank 845.93 965.14 119.21Other Current Assets 189.30 227.71 38.41

Loans & Advances 752.22 1000.85 248.63

Total 10176.76 9180.69


Liabilities & Provision 3900.90 3828.58 72.32

Total 3900.90 3828.58

Working Capital CA-CL 6275.86 5352.11


6275.86 6275.86 1402.32 1402.32

INTERPRETATION:

There is a decrease in working capital due to decrease of current assets in

inventories, sundry debtors and also decrease the current liabilities.

Cash on bank , loans and advances are increase position.


goods, stores, spares and consumables , materials in transit, tools andimplements.)

TABLE 3.1


Rs.In Lakhs

SOURCES OF FUND

SOURCES OF

FUND SOURCES OF FUND

SOURCES

OF FUND





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Secured Loans 9939.00

Miscellaneous

Expenditure 53.48


Deferred Tax

Liabilities 1649.79

Decrease in Working

Capital 923.75

18327.46 18327.46

INTERPRETATION:

In current asset of Loans and advances has appreciation to Rs.248.63 Lakhs

and current liabilities & Provisions of current liabilities has been decreased

Rs.72.32 Lakhs.



TABLE 4

STATEMENT SHOWING CHANGES IN WORKING CAPITAL

2009-10

Rs. In Lakhs

PARTICULARS 2009(RS) 2010(RS) INCREASE DECREASE

Current Assets:-

Inventories 4390.10 3233.11 1156.99



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Sundry Debtors 2596.89 2646.55 49.66

Cash on Bank 965.14 1247.54 282.4

Other Current Assets 227.71 248.33 20.62

Loans & Advances 1000.85 1736.65 735.8

Total 9180.69 9112.18Current Liabilities:-

Liabilities & Provision 3828.58 2825.46 1003.12

Total 3828.58 2825.46

Working Capital CA-CL 5352.11 6286.72


6286.72 6286.72 2091.6 2091.6

INTERPRETATION:

There is increase in working capital due to increase of current assets in sundry

debtors , cash on bank , loans and advances.

Inventories are decrease position .


goods, stores, spares and consumables , materials in transit, tools and

implements.)

TABLE 4.1


Rs.In Lakhs

SOURCES OF

FUND

SOURCES

OF FUND SOURCES OF FUND

SOURCES

OF FUND



Secured Loans 11561.41

Miscellaneous

Expenditure 29.71


Deferred Tax 1251.33 Increase in working 934.61



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Liabilities capital

18213.15

18213.15

INTERPRETATION:-

In current asset of Loans and advances has appreciation to Rs.735.8 Lakhs and

current liabilities & Provisions of current liabilities has been decreased

Rs.1003.12 Lakhs.


Lakhs. The amount invested in assets Rs. 11690.25 lakhs.

FINDINGS

Reserve has been decreasing during all the four years since 2006.

The company debt capital raised more from secured loans & unsecured loans.

Operating cash is increased in 2007 due to increase of trade & payables.

The compa

05 project mohangggfdg

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