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ANALYSIS OF CASHFLOW STATEMENT OF

NESTLE INDIA LTD.

PRESENTED BY:ANKIT SURANA

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CASH FLOW STATEMENT

The statement of Profit and Loss shows profit earned

for a given period.

However a company runs its day-to-day activities and

business operations with cash and not the profit. Therefore it is obvious that understanding the cash

flow generated by company is crucial, both the

company and other users of financial statement.

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NESTLE INDIA LTD.

CASH FLOW FROM

OPERATING ACTIVITIES

2001

(Rs in thousand)

2000

(Rs in

thousand)

Net Profit before interest and tax 2,620,137 2,11,358

Adjustment for:

Depreciation 434,740 378,640

Unrealized exchange differences (155) (710)

Provision for contingencies (net) 180,943 294,606

Provision for pension and gratuity 151,441 92,206

Deficit on fixed assets sold/scrapped 33,164 23,289

Impairment loss on fixed assets 13,921 33,277

Interest received 27,041 28,012

Operating Profit before working

capital changes.

3,461,232 2,959,678

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.

2000 2001

Adjustment for:

Decrease / ( increase) in trade & otherreceivables

178,445 386,191

Decrease / (increase) in inventories (63,274) (440,160)

Increase / (decrease) in trade payables 25,449 289,233

Cash generated from operations 3,601,852 3,194,942

Direct taxes paid (980,472) (702,798)

Net cash inflow / (outflow) from

operations

2,621,380 2,492,144

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed asset (534,690) (767,518)

Sale of fixed asset 18,594 9,973

Interest received on corporate deposites 27,573 1,597

Inter-corporate deposites (net) (418,950) (45,500)

Net Cash inflow / (outflow) from

investing activities

(907,473) (810,448)

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(C) CASH FLOW FROM FINANCING

ACTIVITIES

2001 2000

Proceeds from borrowing (net) 609,021 226,130

Repayment of borrowings (60,000) (500,000)

Dividend paid (1,922,367) (1,198,806)

Corporate dividend tax (196,689) (132,573)

Interest paid (98,441) (153,717)

Net cash Inflow / (outflow) from financial

activities

(1,668,476) (68,270)

Net increase / (decrease) in cash and cash

equivalent (A+B+C)

45,431 (68,270)

Cash and cash equivalent as at opening 101,039

Cash and cash equivalent as at closing 146,470

NET INCREASE / (DECREASE) IN CASH

AND CASH EQUIVALENT

45,431

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ANALYSIS OF CASH FLOW STATEMENT

A. Operating activitiesa. Entire cash inflows of Nestle India is

contributed by operating activities.

This indicates a very strong cash position.

b. Nestle had a very high cash inflow on account

of provisions for contingencies, pensions and

gratuity. This indicates high hidden reserves

and a very favourable cash position.c. Nestle had a net cash inflow indicating

efficient management of working capital.

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B Investing Activities

a. Nestle had a net cash outflow from fixed asset.

- This indicates Nestle is purchasing more fixed

asset. Indication of expanding business.

- Fixed asset are income producing assets, which areexpected to produce higher future revenues.

b. Nestle had significant outflows towards inter-

corporate deposits. This indicates that its future

profits are going to increase.

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C. Financing Activities

a. Nestle had a substantial inflow from borrowing.

b. Nestles dividend and dividend tax outflows at Rs

211.91 cr against the net cash inflow from

operating activities at Rs 262.14 is too high.

c. Nestle financing activities reflect a favourable cash

position in the sense that there is net outflow

despite outflow into fixed asset.