Project Cash Flow Statement Analysis of AXIS Bank

8/19/2019 Project Cash Flow Statement Analysis of AXIS Bank

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CHAPTER I

INTRODUCTION OF BANK

Regional Banks in India are integral part of the rural credit structure of the country.

Since the very beginning, when the Regional Banks in India (RRBs) were established in October

nd, !"#$, these banks played a pivotal role in the econo%ic develop%ent of the rural India. &he

%ain goal of establishing regional rural banks in India was to provide credit to the rural peoplewho are not econo%ically strong enough, especially the s%all and %arginal far%ers, artisans,

agricultural labors and even s%all entrepreneurs. Regional Rural Banks in India are an integral

part of the rural credit structure of the country. Since the very beginning, when the RegionalRural Banks in India (RRBs) were established in October nd !"#$, these banks played a pivotal

role in the econo%ic develop%ent of the rural India. &he %ain goal of establishing regional rural

banks in India was to provide credit to the rural people who are not econo%ically strong enough,especially the s%all and %arginal far%ers, artisans, agricultural labors, and even s%all

entrepreneurs.

The Concept and The Brief History

&he history of regional rural banks in India dates back to the year !"#$. It's the

arsi%ha% co%%ittee that conceptualied the foundation of regional rural banks in India. &he

co%%ittee felt the need of *regionally oriented rural banks' that would address the proble%s andre+uire%ents of the rural people with local feel, yet with the sa%e level of professionalis% of

co%%ercial banks. ive regional rural banks were set up on October nd with a total authoried

capital of Rs.! crore, which later aug%ented to Rs.$ crores.

&here were five co%%ercial banks, vi. -unab ational Bank, State Bank of India, Syndicate

Bank, /nited Bank of India and /nited 0o%%ercial Bank, which sponsored the regional rural banks. &he e+uities of rural banks were divided in a proportion of $123$2!$ a%ong the 0entral

4overn%ent, the sponsor bank and the 0oncerned State 4overn%ent.

&he following years have not been so easy for the regional rural banks in India, as there

were %aor concern of financial viability. 5 nu%ber of co%%ittees were for%ed to find outsolution. Studies were conducted to find out the factors that influence RRBs perfor%ance. &he

roles played by the sponsor banks were also analyed.

FORMATION

&he 4ovt. of India, in 6uly !"#$, appointed a working group to study in depth the

proble% of devising alternative agencies to provide institutional credit to the rural people in theconte7t of steps then initiated under the " -oint 8cono%ic -rogra%. &he arsi%ha%

0o%%ittee 0onceptualied the creation of RRBs in !"#$ as a new set of regionally oriented rural

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banks, which would co%bine the local feel and fa%iliarity of rural proble%s characteristic of

cooperatives with the professionalis% and large resource base of co%%ercial banks. &he4overn%ent of India pro%ulgated the Regional Rural Banks Ordinance on 9 th Septe%ber !"#$,

which was later replaced by the Regional Rural Bank 5ct !"#9.

OBECTI!E"

The RRBs ha#e fo$$o%in& o'(ecti#es)

&o develop rural econo%y.

&o provide credit for agriculture and allied activities.

&o encourage village industries, artisans, carpenters, crafts%en, etc.

&o reduce dependence of weaker sections on %oney:lenders.

&o identify a specific and functional gap in the present institutional structure.

&o supple%ent the other institutional agencies in credit delivery to rural areas,

&o %ake backward and tribal areas econo%ically better by opening new branches.

8very RRBs is authoried to carry on to transact the business of

banking as defined in the Banking Regulation 5ct and %ay also engage in other businessspecified in Section 9(!) of the said 5ct. In particular, a RRB is far%ers and agricultural laborers,

whether individually or in groups, and to cooperative societies, including agricultural %arketing

societies, agricultural processing societies, cooperative far%ing societies, pri%ary agriculturalcredit societies or far%ers' service societies, pri%ary agricultural purposes or agricultural

operations or other related purposes, and granting loans and advances to artisans, s%all

entrepreneurs and persons of s%all %eans engaged in trade, co%%erce, industry or other productive activities, within its area its area of operation.

&he Reserve Bank of India has brought RRBs under the a%bit of priority sector lending on par

with the co%%ercial banks. &hey have to ensure that forty percent of their advances areaccounted for the priority sector. ;ithin the


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OR+ANI"ATIONA* "TRUCTURE

&he %anage%ent of a RRB is vested in a nine:%e%ber Board of >irectors headed by chair%an

who is an officer deputed by a sponsor bank but appointed by the 4ovt. of India. &hree directorsto be no%inated by the central 4overn%ent. &wo directors to be no%inated by the sponsor bank.

&he sponsor bank, besides subscribing to the capital and deputing

one of its official as chair%an, provides assistance to RRB in several ways as financialacco%%odation, deputing %anagerial and other staff and arranging the recruit%ent of staff and

their training.

Ro$e of Re&iona$ R,ra$ Ban-s in Econo.ic De#e$op.ent

&he i%portance of the rural banking in the econo%ic develop%ent

of a country cannot be overlooked. 5s 4andhii said ?Real India lies in villages@ and village

econo%y is the backbone of Indian econo%y. ;ithout the up lift%ent of the rural econo%y aswell as the rural people of our country, the obectives of econo%ic planning cannot be achieved.

In fact, the real growth of Indian econo%y lied in the e%ancipation of rural %asses fro% acute

poverty, une%ploy%ent, and socio:econo%ic backwardness. Aeeping this end in view, various

i%portant plans and progra%%ers of rural develop%ent have been conceived and i%ple%ented

by the govern%ent of India since the co%%ence%ent of first five:year plan fro% !"$!:$9. But an

appraisal of the achieve%ent of these progra%%ers clearly reveals that %any progra%%ers failed

to achieve the desired obectives due to the backward econo%ic condition and lack of ade+uate

finance to the poor people in the rural areas. ence, bank and other financial institutions are of

vital i%portance for develop%ent of rural econo%y of a country. &he present study is a %odest

atte%pt to %ake an appraisal of the credit needs of the rural people and the way Regional Rural%eet the sa%e in the state of 5runachal -radesh. It deals with the perfor%ance evaluation of

5runachal -radesh. Rural Bank (5-RB) for the econo%ic develop%ent of the state. urther, an

atte%pt has also been %ade to study the growth and perfor%ance of Scheduled 0o%%ercial

Banks with special e%phasis on Regional Rural Banks (RRBs) in India and orth:8ast Region.

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Ba$ance "heet of A/is Ban- 0000000000000000000 in Rs1 Cr1 0000000000000000000

Car D1# Car D1E Car D1" Car D!1 Car D


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! %ths ! %ths ! %ths ! %ths ! %t

0apital and Fiabilities2

&otal Share 0apital E!.93 3$#.#! 3$".1! 8+uity Share 0apital E!.93 3$#.#! 3$".1!

Revaluation Reserves 1.11 1.11 1.11 1.11 1.

et ;orth 3,

Borrowings $,!"$.91 $,9Balance with Banks, Coney at 0all ,$#.# $,!"E.$E $,$"#.9" $,#3.$9 #,$.

5dvances 39,E#9.epreciation

0ontingent Fiabilities $$,""3.1< #E,1E.


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9


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It was not the first though. &hat honour belongs to the Bank of /pper India, which was

established in !E93, and which survived until !"!3, when it failed, with so%e of its assets and

liabilities being transferred to the A$$iance Ban- of "hi.$a

oreign banks too started to arrive, particularly in 0alcutta, in the !E91s. &he Co.ptoire

d8Esco.pte de Paris opened a 'ranch in Ca$c,tta in 35697 and another in Bo%bay in !E9J

branches in Cadras and -ondicherry, then a rench colony, followed. SB0 established itself in

Bengal in !E9". 0alcutta was the %ost active trading port in India, %ainly due to the trade of the

British 8%pire, and so beca%e a banking centre.

&he first entirely Indian oint stock bank was the Oudh 0o%%ercial Bank,

8stablished in !EE! in aiabad. It failed in !"$E. &he ne7t was the -unab ational Bank,established in Fahore in !E"$, which has survived to the present and is now one of the largest

banks in India.

5round the turn of the 1th 0entury, the Indian econo%y was passing through a relative period

of stability. 5round five decades had elapsed since the Indian Cutiny, and the social, industrial

and other infrastructure had i%proved. Indians had established s%all banks, %ost of which

served particular ethnic and religious co%%unities.

NATIONA*I"ATION

&he ne7t significant %ilestone in Indian Banking happened in the late !"91s when the Indira

4andhi govern%ent nationalied, on !"th 6uly, !"9", !< %aor co%%ercial Indian banks,

followed by nationaliation of 9 %ore co%%ercial Indian banks in !"E1. &he stated reason for

the nationaliation was %ore control of credit delivery. 5fter this, until the !""1s, the

nationalied banks grew at a leisurely pace of around :;0a$so ca$$ed as the Hind, &ro%th of

the Indian econo.y1

&o understand the Indian banking sector %ore easily a diagra% is shown regarding the na%e of

the bank, its nu%bers shown in

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BACK+ROUND

57is Bank was the first of the new private banks to have begun operations in !""


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&he Bank today is capitalied to the e7tent of Rs. 3$".


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57is Bank Ftd. has been pro%oted by the largest and the best inancial Institution of the country,

/&I. &he Bank was set up with a capital of Rs. !!$ corers, with /&I contributing Rs. !11 corers,

FI0 : Rs. #.$ corers and 4I0 and its four subsidiaries contributing Rs. !.$ corers each.

THE COMPAN2 AND IT" PRODUCT *INE

57is Bank Fi%ited (57is Bank) offers a broad range of retail G corporate banking products and

services in India. &he bank was earlier known as /&I Bank Fi%ited.

&he co%pany offers several products including accounts, deposits, cards,

credits, advisory services, treasury, %utual funds, cash %anage%ent, international banking and

transaction services. &he bank operates E# branches and e7tension counters, as on 3! Carch11". 57is Bank has operations in " States and 3 /nion &erritories in India. &he bank has a

network of 3$"$ 5&C %achines. 57is Bank is the third largest 5&C network provider in India. It

also has branches in 0hina, ong Aong, Singapore and /58. &he bank is head+uartered at

Cu%bai in India.

&he co%pany reported revenues of (Rupee) IR !1E,"!.!3 %illion during the

fiscal year ended Carch 11", an increase of $eposits

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Foans

0ards

Invest%ents

Insurance

-ay%ents

Other Services

Corporate Ban-in&)

5ccounts

0redit

0apital Carket

&reasury

0ash Canage%ent Services

4ovt Business

NRI ser#ices)

5ccounts

>eposits

Re%ittances

COMPETITOR" OF A


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BOARD OF DIRECTOR"

&he %e%bers of board are 2

S%t. Shikha Shar%a Canaging >irector G 08O

Shri .0. Singhal >irector

Shri. 6.R. Har%a >irector

>r. R.. -atil >irector

S%t. Ra%a Biapurkar >irector

Shri R.B.F. Haish >irector

Shri C.H. Subbiah >irector

Shri Ra%esh Ra%anathan >irector

Shri A. . -rithvira >irector

!9


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CHAPTER III

METHODO*O+2 AND MODE* OF RE"EARCH

"TATEMENT OF THE PROB*EM

Banks are the %ain financial sources to the public. &hey are the providers and%obilies of the finance fro% the public. But they are facing different proble%s such as

dissatisfaction of custo%er regarding banking services, i%proper cash %anage%ent financial

perfor%ance and the like. 5%ong these proble%s faced by RRBs 0ash %anage%ent is veryi%portant techni+ue to be adopted in any bank. ence, this study concentrates on cash flow

analysis of 5LIS B5A 5/C5 &8A>I BR50 M>.

OBECTI!E" OF "TUD2

&he %ain intension of this study is to analye the financial position of the 5LIS B5A

5/C5 &8A>I BR50 M>. &he following are the %ain obectives for the study2

&o %easure the profitability and li+uidity position in the organiation.

&o evaluate the cash position of the bank through cash flow analysis.

&o analye total cash deposits, loan syndication position of the bank

&o elicit the sources of cash inco%e and cash pay%ents.

NEED FOR THE "TUD2

It is the co%%on obligation to every financial institution to know its strengths andweaknesses. &hough the co%pany has several depart%ents, the under researched area is finance.

But there is less nu%ber of studies have been conducted on the cash flow analysis in 5LISB5A 5/C5 &8A>I BR50 M>. 5.-. So, the study is needed to help the bank for

its s%ooth financial transactions with effectively.

RE"EARCH METHODO*O+2 AND DE"I+N

&here are So%e I%portant branches in 5ndhra -radesh one in hyderabad, one in-rakasha% >istrict, one in Aurnool district, one in 5nanthapur district, one in ellore district.

&he ead Office located in yderabad, district and it has various branches through out thedistrict. 5%ong all these branches, the selected branch is 5LIS B5A C5I BR50 . islocated in M>8R5B5> in 5ndhra -radesh. &he e7ecutives and financial depart%ent officials

are en+uired for the purpose of the study. &he study is %ainly based on the analytical research

design. &his largely interprets the already available infor%ation.

DATA "OURCE"

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&he data for the present study is collected through pri%ary and secondary sources.

Secondary data is obtained fro% annual reports of the co%pany and pri%ary data was collected by interacting financial e7ecutives of &he 0o%pany.

Pri.ary Data

&he pri%ary data of this study was colleted by consulting the accounting officer,

financial 87ecutives of that bank.

"econdary Data

&he study is %ainly based on the sources of secondary data. &he secondary data for this study was collected fro% the published sources i.e., annual reports and

;;;.5-4B5A.0OC

"COPE OF THE "TUD2

&he present study is confined to only 5LIS B5A 5/C5 &8A>I BR50M>. &he study is li%ited to cash flow analysis and it has been analyed by taking theinfor%ation related to both the present and past data into consideration with reference to the

perfor%ance of the bank.

PERIOD OF "TUD2

TOO*" FOR THE "TUD2

&he data relating to the perfor%ance of he 5LIS B5A 5/C5 &8A>I

BR50 M>. fro% different activities that is operating activities, investing activities andfinancing activities have been carefully analyed and also cash flow state%ent, colu%n and bar

charts.

*IMITATION" OF "TUD2

&he %aor li%itations of the study are2

>ue to constraint of ti%e, the researcher unable to collect detailed analysis of the

financial data.

&here are differences in collected data as of data collected fro% different secondarysources.

inance is also an i%portant constraint for the detailed analysis.

!E

http://www.apgbank.com/http://www.apgbank.com/


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CHAPTER I!

CA"H F*O= "TATEMENT ANA*2"I"

INTRODUCTION

5n analysis of cash flow of a concern during a specified period, presented in the for% of a

state%ent can be for the past or can be a proection for the past or can be proection for thefuture. &he cash flow of the concern in the near future, say for a period of si7 %onths or in year,

can be prepared based on the past trends and e7pectations of the concern regarding factors that

would affect its cash receipts and cash pay%ents. Such an esti%ate of future cash flows is better ter%ed *cash budget. 0ash flow state%ent generally refers to the state%ent showing the receipts

and pay%ent or cash during the period covered by two consecutive balance sheet.

0ash flow analysis enables the %anage%ent to plan and co:ordinate the financialoperations of the enterprise, an furnish the basis for evaluating financing policies. It provides a

baro%eter for ensuring the profitability of the business, and %akes financing proble%s of the

business %uch %ore %anageable.

CA"H F*O= MANA+EMENT

0ash flow %anage%ent is the process of %onitoring, analying, and adusting business'scash flows. &he %ost i%portant aspect of cash flow %anage%ent is avoiding e7tended cash

shortages, caused by a ti%e gap between cash inflows and outflows. ir% cannot stay in business

if it is not able to pay its bills on ti%e. &herefore, a cash flow analysis is re+uired on as regular basis so that so that it can take the necessary steps to %eet cash flow proble%s. &oday, even in

the large business organiations cash is %ot as readily available as it was before, so co%panies

are looking into ways to gain better visibility into future cash flows and to %onitor it for better planning. &here is a growing need for co%panies to forecast %ore accurately because in addition

to tightened cash flow, there is an increasing need for ti%ely forecasts as %arket conditions have

beco%e volatile. One of the best way to %anage cash in the business is to fully understand cash

flow patterns. &hese helps a fir% in avoiding cash deficiencies as well as e7cessive idle cash balances. Coreover, cash flow analysis is needed2

&o ensure that the cash balance always re%ains above the desired %ini%u% level

&o predict when cash levels will rose sufficiently above the %ini%u% level to

facilitate invest%ent of idle balances.48OR48 -IFI-5&OS is of the view that, in its generic sense, a cash flow is the

receipt and the pay%ent of a%ount of %oney and that it i%plies %ore than our accrual

or a financial obligation, hence cash flow is a %ove%ent of cash which is a real one. FFeon Si%ons observes that cash flow is fre+uently and erroneously assu%ed to include

only current operations.

CA"H F*O= CONCEPT"

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In its si%plest for%, cash flow is the %ove%ent of %oney in and out of the

business uses cash to generate goods or services for the sale to its custo%ers, collectsthe cash fro% the sales, and then co%pletes this cycle all over again.

CA"H INF*O="

0ash Inflows are the %ove%ent of %oney into the business. Inflows are %ost

likely fro% the sale of goods or services to the custo%ers. If credit e7tended to its

custo%ers, then an inflow occurs as the fir% collects on the custo%er's accounts. or%ally the %ain sourced of cash inflows to a business are receipts fro% sales,

increases in bank loans, proceeds if share issues and asset disposals, and other inco%e

such as interest earned.

CA"H OUTF*O="

0ash Outflows are the %ove%ent of %oney out of the business. Outflows are

generally the result of paying e7penses. If the business involves reselling goods, then its

largest outflow is of the purchases of raw %aterials and other co%ponents needed for the %anufacturing of the final product. Salaries and wages to staff, purchasing fi7edassets, and paying accounts payable are also cash outflows.

NET CA"H F*O="

et 0ash low is the difference between the inflows and outflows within agiven period. 5 proected cu%ulative positive net cash flow over several period

highlights the capacity of a business to generate surplus cash and, in the sa%e %anner, a

cu%ulative negative cash flow indicates he a%ount of additional cash re+uired to

sustain the business.FREE CA"H F*O="

So%e financial analysts give %uch i%portance to concept of cash flow called *ree0ash low'. &he cash is considered free if it can be used for any desirable purpose. &he

large is the a%ount, the %ore a fir% has fle7ibility and invest%ent strength because it

can use the %oney i%%ediately to take advantage of an opportunity. &he accu%ulationof free cash co%es fro% free cash flows which are calculated as cash flow fro%

operations, less capital e7penditure for ongoing production needs and pay%ent of

dividends. ree cash %ay be accu%ulating in li+uidity but it is not intended to be usedfor financing working capital re+uire%ent. Instead, it is used for long:ter% purposes

such as capital budgeting e7penditure on asset, %ergers, ac+uisitions etc.

DEFINITION")

&he following are used in this state%ent with the %eaning specified2

0ash co%prises cash on hand and de%and deposits with banks

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0ash e+uivalents are short:ter% highly li+uid invest%ents, that are readily

convertible into know a%ounts of cash and which are subect to an insignificantrisk of changes in value.

0ash flows are inflows and outflows of cash and cash e+uivalents.

Operating activities are the principal revenue:producing activities of the

enterprise and other activities and are not investing or financing activities. Investing activities are the ac+uisition and disposal of long:ter% assets and other

invest%ents not included in cash e+uivalents.

inancing activities are activities that result in changes in the sie and

co%position of the owners' capital (including preference share capital in the

case of a co%pany) and borrowings of the enterprise.

C*A""IFICATION OF CA"H F*O="

&he %odel prescribed in 5S:3, *0ash low State%ent, classifies cash flow into threecategories cash flow fro% operating activities, cash flow fro% investing activities, cash flow

fro% financing activity.

CA"H F*O= FROM OPERATIN+ ACTI!ITIE"

&he state%ent provides infor%ation about the cash generated fro% a co%pany's pri%ary operating activities. 5 co%pany's operating activities services. Operating activities that

generate cash inflow include custo%er other operating cash receipts. Operating activities that

create cash outflows include pay%ents to suppliers, pay%ent to e%ployees, interest pay%ents, pay%ent of inco%e ta7es and other operating cash pay%ents.

CA"H F*O=" FROM IN!E"TIN+ ACTI!ITIE"

&his area lists all the cash used or provided by the purchase on sale of inco%e

producing assets. Investing activities include giving loans and advances, collection fro% those

loans and advances, buying and selling and buying and selling securities not classifies as cashe+uivalents. 0ash inflows generated by investing activities include sales of fi7ed assets such as

property, plant, e+uip%ents, sale of debtNe+uity instru%ents and the collection of loans.

CA"H F*O=" FROM FINANCIN+ ACTI!ITIE"

&his section %easures the flow of cash between a fir% and its owners and creditors.

inancing activities include borrowing and repaying funds fro% suppliers of funds, a return on

their invest%ents. &he return on invest%ent is provided in the for% of dividends and interest. If the fir% uses debt or e+uity to e7pand its operations, it is disclosed in the financing activities.

5lso, if the fir% uses cash to retire debt, it appears in the state%ent. egative nu%bers can %eanthe co%pany is servicing debt bur can also %ean the co%pany is %aking dividend pay%ents and

share buyback, which is good news for investors.

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CA"H F*O= "TATEMENT

In a business in a perfect world there is no ti%e gap between a cash inflow and a cash

outflow. But in real world, cash outflows and inflows occur at different ti%es, and never actuallyoccur together. /sually, cash inflows lag behind the cash outflows, leaving the business short of

cash. &his shortage is ter%ed as cash flow gap. &he cash flow gap represents and e7cessive

outflow of cash that %ay not be covered by a cash inflow for a definite period of ti%e say a few

weeks, few %onths, or even few years. Canaging the cash flow allows a fir% to bridge the cashflow gap. It does this by e7a%ining the different ite%s that affect the cash flow of the business.

&he cash flow state%ent provides infor%ation regarding a co%pany's cash receipts andcash pay%ents. &he state%ent co%ple%ents the profit G Foss 5ccount and Balance Sheet. Over

the life of a co%pany, total net profits or inco%e and net cash inflow will e+ual.

5ll co%panies provide the cash flow state%ents as part of their financial state%ents,

but cash flow can also be calculated net inco%e plus depreciation and other non:cash ite%s.

5 co%pany not generating the sa%e a%ount of cash as co%petitors is bound to loseout when there are difficult ti%es. Short:ter% li+uidity can also be achieved by deferring

pay%ents of current obligationsJ however, co%pany's ability to generate cash flow through the

deferred pay%ents of current liabilities will be e7hausted. &his state%ent is useful for decision%aking because it provides relevant and reliable infor%ation for predicting future cash flows.

&he cash flow state%ent is an i%portant analytical tool that the trade creditor, canuse to deter%ine if a custo%er is able to generate sufficient cash to %eet its trade obligations.

/sing the cash flow state%ent in the credit analysis process can help to users evaluate a

custo%er's solvency, li+uidity position, and its financial fle7ibility

In the cash flow state%ent, cash receipts and pay%ents are classifies as operating,

investing and financing activities. &he cash flow state%ent e7plains the change during

the period in cash and cash e+uivalents. 0ash e+uivalents are short:ter%, highly li+uidinvest%ents that are readily convertible to cash. &he cash flow state%ent %ust

su%%arie the cash flows so that net cash provided or used by each of the three types of

activities is reported. Beginning and ending cash %ust be reconciled based on the neteffect of these activities.

"TEP" IN PREPARATION OF CA"H F*O= "TATEMENT

Before preparing cash flow state%ent, first of all, the following three steps haveto be co%pleted

>eter%ining cash flows fro% operations or operating activities

>eter%ining cash flows fro% investing activities.

>eter%ining cash flows fro% financing activities.

Cash fro. operation


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In#estin& Acti#ities)

&he separate disclosure of cash flows arising fro% investing activities is i%portant because

the cash flows represent the e7tent to which e7penditures have been %ade for resources intendedto generate future inco%e and cash flows. 87a%ple of cash flows arising fro% investing are2

0ash pay%ents to ac+uire fi7ed assets (including intangible). &hese pay%ents include

those relating to capitalied research and develop%ent cost and self:constructed fi7ed

assets.

0ash receipts fro% disposal of fi7ed assets.

0ash pay%ents to ac+uire share. ;arrants or debt instru%ents of other enterprises and

interests in oint ventures.

0ash receipts fro% disposal of shares, warrants or debt instru%ents of other enterprises

and interests in oint ventures.

0ash advances and loans %ade to third parties.

0ash receipts fro% the repay%ent to advances and loans %ade to third parties.

0ash pay%ents for futures contracts, forward contracts and swap contracts e7cept when

the contracts are held for dealing or trading purposes or the pay%ent are classified as

financing activities and

0ash receipts fro% futures contracts, forward contracts, option contract, swap contracts

e7cept when the contracts are held for dealing or trading purposes, or the receipts are

classified as financing activities.

;hen a contract is accounted for as a hedge of an identifiable position, the cash flows of the

contract are classified in the sa%e %anner as the cash flows of the position being hedged.

Financin& Acti#ities)

&he separate disclosure of cash flow arising fro% financing activities is i%portant because

it is useful in predicting clai%s on future cash flows by providers of funds to enterprise.

87a%ples of cash flows arising fro% financing activities are2

0ash proceeds fro% issuing shares or other si%ilarly instru%entsJ

0ash proceeds fro% issuing debentures, loans, notes, bonds, and other short of long:

ter% borrowings, and cash repay%ents of a%ounts borrowed

U"E" OF CA"H F*O= "TATEMENT

5 cash flow state%ent is an i%portant financial tool for %anage%ent efficient short:ter%

financial planning. It enables the %anage%ent to plan and co:ordinate the financial operation of the concern and furnish the basis for evaluating financing policies. It helps the %anage%ent in

%aking the financing proble%s of the business %uch %ore %anageable. &he following are the

uses of cash flow analysis.


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He$pf,$ in efficient cash .ana&e.ent) It is very helpful in understanding the cash

position of a fir%. Since cash is the basis for carrying on business operations, the cashflow state%ent is very useful in evaluating the current cash position.

P$annin& of Pro&ra..es) &he repay%ent of loans, replace%ent of assets and other such

progra%%es can be planned on its basis.

He$pf,$ in short0ter. financia$ decisions) &he cash flow state%ent is helpful in %aking

short ter% financial decisions relating to li+uidity, and the ways and %eans position of the

fir%.

Usef,$ of Capita$ ',d&etin&) 0ash flow state%ent is also useful for %aking appraisal of

different capital invest%ent proects in order to deter%ine their viability and profitability.

Usef,$ as a contro$ de#ice) It helps the %anage%ent to understand the past behavior of

the cash cycle, and to control the uses of cash in future. 5 co%parison of the proected

cash flow state%ent helps to %anage%ent in appraising the inflows and outflows of cash

according to the plan and taking the necessary re%edial %easures.

Usef,$ to o,tsiders) 0ash flow state%ent the short:ter% solvency of a business concern

as well as its capacity to %eet its short:ter% obligation.

*IMITATION" OF THE CA"H F*O= "TATEMENT

0ash flow state%ent has its li%itations too. or e7a%ple, cash flow does not reveal the

profit earned or lost during a particular period. 0ash flow also does not indicate the overall

financial health of the co%pany. &hough, the state%ent of cash flow gives a good indication of what the co%pany is doing with its cash and fro% where cash is being generated, but these do

not directly reflect true financial condition. &he cash flow state%ents does not account for

liabilities and assets, which are recorded in the balance sheet. 5ccounts receivable and accounts payable, each of which can be very large for a co%pany, are also not reflected in the cash flow

state%ent. In other words, it is a co%pressed version of the co%pany's cashbook that includes a

few other ite%s, like the financing section, which tells the a%ount of %oney the co%pany sent or collected fro% the repurchase or sale of stock, the a%ount of issuance or retire%ent of debt, and

the a%ount the co%pany paid out in dividends. In conclusion, interpreting the cash state%ent is

not a very easy and si%ple task. 5nalying the cash flow together with the other state%ent gives

a gli%pse into the short:ter% financial position of co%pany.

C*A""IFIED CA"H F*O= "TATEMENT)

&he cash flow state%ents are classified into three classes.

• 0ash flow fro% operating activities.

• 0ash flow fro% investing activities.

• 0ash flow fro% financing activities.

$


26/44

&hought this for%at calls for %ore details. It provides useful infor%ation on how cash

flows have been influenced by different kinds of decisions. 4iven the greater

infor%ational content of such a for%at, the discussion paper on *cash flow state%ent'

prepared by the accounting principles board of the institute of chartered accountants of

India reco%%ends this for%at. Incidentally the listed co%panies %ust include a *cash

flow state%ent' prepared according to the for%at suggested in the discussion paper intheir annual reports.

For.at of a cash f$o% state.ent

Cash f$o% state.ent

or the year ending onPPPP.. Balance as on !:!:111

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::0ash balancePPPPPPPP PPPPPP

Bank balancePPPPPPPP PPPPP..

5dd2 Sources of cashIssue of shares PPPPP.

Raising of long ter% loans PPPPP..

Sale of fi7ed assets .PPPPP

Short:ter% operations2 0ash fro% operations PPPPP.

-rofit as per profit and loss account PPPPP.

5ddNless2 5dusted for non:cash ite%s PPPPP 5dd2 increase in current liabilities PPPPP

>ecrease in current assets PPPPP

Fess2 increase in current assets PPPPPP..

>ecrease in current assets PPPPPP.. &otal cash available PPPPPP..

Fess2 application of cash2

Rede%ption of redee%able preference shares PP.. .PPPP. Rede%ption of long ter% loans PPPPPP..

-urchase of fi7ed assets PPPPPPP.

>ecrease in deferred pay%ent liabilities PPPPPPP..

0ash outflow on account of operation PPPPPPP.. &a7 paid PPPPPPP..

>ividend paid PPPPPPP..

>ecrease in unsecured loans, deposits etc PPPPPPPP

Tota$ app$ications PPPPPPPP

0losing balance

0ash balance PPPPPP....

Bank balance PPPPPPPP

9


27/44

Qit should tally with the bank balance as shown (!):()

#


28/44

CHAPTER !

DATA ANA*2"I" AND IMP*EMENTATION

NET CA"H F*O=

&he total cash flow can be calculated by adding operating, investing and financing

activities of the bank.

Tota$ cash f$o% > operatin& ? financin& ? in#estin& acti#ities

&he total cash flow is being described in the table per the period of $ years fro% 1!!:11#

TOTA* NET CA"H F*O=

Car:!! Car:!1 Car:1" Car:1E Car:1#

et cashflow:

operatingactivity !!,

et cash usedin fin. activity E,#9".9" $,31


29/44

NET CA"H F*O=0OPERATIN+ ACTI!IT2

Interpretation)

&his can be calculated by taking total operating, investing and financial activities. &hisshows that in the year 1!1 the total cash flow will be increased fro% Rs.!#!$" to

Rs.


30/44

TOTA* OPERATIN+ ACTI!IT2

TOTA* OPERATIN+ ACTI!IT2

Interpretation

&here can be calculated by taking net profit %inus increaseNdecrease assets and liabilities. &his

shows that in the years 11E and 1!1, negative values will occur. or this purpose, there is a

%utual increase and decrease

31

&otal Fiabilities &otal 5ssets &otal Inco%e

Car:!! #3,$#.! #3,$#.! !$$E3E.13

Car:!1 !1",$##.E$ !1",$##.E< !3#33.9<

Car:1" !


31/44

in assets and liabilities.

Tota$ in#estin& acti#ities)

&his can be calculated by taking the difference between the cash inflow and outflow.

In#estin& acti#ity > Cash Inf$o% @ Cash O,tf$o%

Tota$ In#estin& Acti#ity

M85R

8>8>

05S

I

FO;

05S

O/&

FO;

05S ROC IH8S&I4

50&IHI&M

11# !!,

1!! $,"$.$3 :3,9$$.$E !,93#.1!

&O&5F IH8S&I4 50&IHI&I8S

3!


32/44

Interpretation)

&his can be calculated by taking 0ash inflow and 0ash Outflow. &his shows that the bank

has spent fewer a%ounts for purchasing the assets, so there is a decrease in 11":!1 when

co%pared to 11#:1E.

Tota$ Financin& Acti#ities

In this activities can be calculated by taking the financial activity.&his can be show in the table for the year 119:1!1.

&otal financing activities

BORRO;I4S

et financial

inco%e

11" !#!9"9 E#9"9"

1!1 !$$!"" $31


33/44

Interpretation)

&his graph shows that the bank borrowing position. &his shows that the bank had decreased to

%oney fro% others. So the position is good in the bank.

Net profit)

&he net profit can be calculated by taking total inco%e and total e7penses.

Net profit > Tota$ inco.e @ Tota$ e/penses

Tota$ inco.e > Interest e/pended ? other e/penses

8& -ROI&

&O&5FI0OC8

&O&5F8L-8S8S

8&-ROI&

11" !$$E3E.13 !$!#E!.#


34/44

APPENDICE"

3


35/44

Partic,$ars

For the y

3939

A CA"H F*O= FROM OPERATIN+ ACTI!ITIE"

Interest 8arned during the year 3!#$!#!

Other inco%e 3!1#E1

Fess2

Interest paid during the year on deposits, borrowings etc., !91#393

Operating 87penses including -rovision G 0ontingencies "#39E1

NET PROFIT

5dd2

>epreciation on i7ed 5ssets 969

>epreciation adusted on leased assets

-rovisions G 0ontingencies

I CA"H PROFIT +ENERATED FROM OPERATION" G3

(-rior to changes in operating 5ssets G Fiabilities

II CA"H F*O= FROM OPERATIN+ A""ET" *IABI*ITIE"

IncreaseN(>ecrease) in Fiabilities>eposits Other 5ssets :333"1

&otal of II :!#E

A1 NET CA"H F*O= FROM OPERATIN+ ACTI!ITIE"I?II G43

B1 CA"H F*O= FROM IN!E"TIN+ ACTI!ITIE"

SaleN>isposal of i7ed 5ssets !33#

-urchase of i7ed 5ssets 0:G5G

B1 NET CA"H F*O= FROM IN!E"TIN+ ACTI!ITIE" 0:5

C1 CA"H F*O= FROM FINANCIN+ ACTI!ITIE"

Share 0apital

Share pre%iu%

Other Reserves G Surplus

Borrowings !9!#""

5%ount paid off on rede%ption of sub:ordinate debt

5%ount raised through fresh issue of Sub:ordinated >ebt

>ividend paid2 -revious year dividend, paid during the current year

3$


36/44

C1 NET CA"H F*O= FROM FINANCIN+ ACTI!ITIE" 3634GG

TOTA* CA"H F*O= DURIN+ THE 2EAR A?B?C 343G

IncreaseN(>ecrease) in 0ash flow

I 0ash and 0ash 8+uivalents at the Beginning of the year

0) 0ash and Balances with the RBI !9E11E3

>) Balances with Banks and Coney at 0all and Short otice $3E<

Tota$ @ I :9:64

II CA"H AND C"H EUI!A*ENT" AT THE END OF THE 2EAR

0) 0ash and Balances with RBI ) Balance with Banks and Coney at 0all Short otice 3199"99

Tota$ @ II :4GG6

TOTA* CA"H F*O= DURIN+ THE 2EAR

Increase N (>ecrease) in 0ash flow (II I) !#!$"

BA*ANCE "HEET A" AT 3191939 A.o,nt in 999Js

Partic,$ars BA*ANCE "HEET

A.o,nt in 999Js

99509G 99G039

0apital and Fiabilities

Share capitalReserve and surplus

>eposits

Borrowing

Other liabilities and provision


37/44

Contin&ent $ia'i$ities 39GGG 39

Profit and *oss Acco,nt

Partic,$ars 99509G 99G039

Inco.e

Interest 8arned

Other inco%e

E1E


38/44

"TATEMENT OF CA"H F*O=

Partic,$ars For the year ende

3939

A CA"H F*O= FROM OPERATIN+ ACTI!ITIE"

Interest 8arned during the year 3E#9999

Other inco%e 39#9

Fess2

Interest paid during the year on deposits, borrowings etc.,


39/44


40/44

>) Balances with Banks and Coney at 0all and Short otice 3199"99

Tota$ @ I :4GG6

II CA"H AND C"H EUI!A*ENT" AT THE END OF THE 2EAR

0) 0ash and Balances with RBI !E#!3$

>) Balance with Banks and Coney at 0all Short otice Tota$ :G556 593G

5ssets

0ash and Balance with RBI'sBalance with banks and %oney at

call and short noticesInvest%ents

et advances

i7ed assets

Other assets

Tota$ :G556 593G

Contin&ent $ia'i$ities 39 336465


41/44

Profit and *oss Acco,nt

Partic,$ars 99G039 939033

Inco.e

Interest 8arned

Other inco%e

3!#$!#!

3!1#E1

Tota$ 9653G :54655

E/pendit,re

Interest e7pendedOperating 87penses

-rovision and

0ontingencies-rofit

!91#393"$1!1!

3$#E

"1


42/44

"TATEMENT OF CA"H F*O=

Cash f$o%

Mar 8 33 Mar 8 39 Mar 8 9G Mar 8 95 Mar 8 94

-rofit before ta7 $,!3$.99 3,E$!.39 ,#E$.!" !,9 etcash used in fin. activity E,#9".9" $,31


43/44

Mar 8 33 Mar 8 39 Mar 8 9G Mar 8 95 Mar 8 94

0ash and e+uivalnt end of year !,


44/44

FINDIN+"

&he %aor findings and conclusions of the study are2

Of the bank Inco%e is increased fro% Rs.3

11":!1 Rs.$,E!,1 5dvances also decreased fro% Rs.$",1!,#3 to Rs.!1,9#,!$E thousands.

&otal cash flow fro% operating activities is Rs.!,,#E to Rs.,#3,

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Project Cash Flow Statement Analysis of AXIS Bank

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