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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
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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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FUNDS FLOW STATEMENT
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
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FUNDS FLOW STATEMENT
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
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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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
REVIEW OF LITERATURE
FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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
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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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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)*** ***
VCR INSTITUTE OF MANAGEMENT STUDIES, ChittoorPage 39
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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
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. In
other words this statement is prepared with the help of the changes in non-current
liabilities of balance sheet.
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.
STATEMENT FORM FUND FLOW STATEMENT
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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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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FUNDS FLOW STATEMENT
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
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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FUNDS FLOW STATEMENT
STATEMENT SHOWING CHANGES IN WORKING
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 - -
Current Liabilities:-
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
FUNDS FLOW STATEMENT FOR 2007-2008
Rs.In Lakhs
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FUNDS FLOW STATEMENT
Sources of fund Sources of fund Sources of fund Sources of fund
Share Capital 1359.68 Investments 212.47
Reserves 4895.67 Fixed Assets 13726.46
Secured Loans 11326.44 Miscellaneous Expenditure 77.25
Unsecured Loans 725.81 Net Current Assets 6275.86
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.
During the year the company in borrowings taken secured loans Rs.11326.44
Lakhs. The huge amount invested in assets Rs. 13726.46 lakhs.
TABLE 3
STATEMENT SHOWING CHANGES IN WORKING
CAPITAL2008-08
Rs. In Lakhs
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FUNDS FLOW STATEMENT
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
Current Liabilities:-
Liabilities & Provision 3900.90 3828.58 72.32
Total 3900.90 3828.58
Working Capital CA-CL 6275.86 5352.11
Increase in Working Capital 923.75 923.75
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.
In the inventories (Raw materials ,packing materials ,work in process, finished
goods, stores, spares and consumables , materials in transit, tools andimplements.)
TABLE 3.1
FUNDS FLOW STATEMENT FOR 2008-2009
Rs.In Lakhs
SOURCES OF FUND
SOURCES OF
FUND SOURCES OF FUND
SOURCES
OF FUND
Share Capital 1359.68 Investments 212.69
Reserves 3353.73 Fixed Assets 12709.18
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FUNDS FLOW STATEMENT
Secured Loans 9939.00
Miscellaneous
Expenditure 53.48
Unsecured Loans 2025.26 Net Current Assets 923.75
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.
During the year the company in borrowings taken secured loans Rs.9939.00
Lakhs. The huge amount invested in assets Rs. 12709.18 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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FUNDS FLOW STATEMENT
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
Increase in Working Capital 934.61 934.61
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 .
In the inventories (Raw materials ,packing materials ,work in process, finished
goods, stores, spares and consumables , materials in transit, tools and
implements.)
TABLE 4.1
FUNDS FLOW STATEMENT FOR 2009-2010
Rs.In Lakhs
SOURCES OF
FUND
SOURCES
OF FUND SOURCES OF FUND
SOURCES
OF FUND
Share Capital 1359.68 Investments 206.42
Reserves 1870.62 Fixed Assets 11690.25
Secured Loans 11561.41
Miscellaneous
Expenditure 29.71
Unsecured Loans 2170.11 Net Current Assets 2686.77
Deferred Tax 1251.33 Increase in working 934.61
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FUNDS FLOW STATEMENT
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.
During the year the company in borrowings taken secured loans Rs.11561.41
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