An Analysis of Cash Flow Statements in Private

Sector Banks in Andhra Pradesh

Submitted
By

22UJ1E00J4
PRUDHVI POLAKI

Introduction
A crucial tool for examining a company organization's cash situation is the cash flow

statement. The primary function of the cash flow statement is to analyze the financial

statements of the company. It can indicate changes in the cash position over the course

of three fiscal years. The cash flow statement also gives details about a company's cash

inflows and outflows over a specified time period. It offers insightful data that supports

the balance sheet and the profit and loss account. The cash flow statement also provides

information about how the firm sources and uses cash for operating, investing, and

financial activities over a given period of time. It also provides information about the

company's debt repayment and dividend distribution programs, as well as potential

reinvestment opportunities to grow its operations.

It is hoped that the information in this article will assist readers in properly

understanding cash flow statements. This article is based on the procedure followed and

preparation instructions found in various text books for the benefit of students and

accountants. operating, funding, investment, and cash flow.

Overview

A cash flow statement is a statement that lists the amounts of money received inflow and

paid out outflow throughout the course of a period covered by consecutive balance

sheets. Additionally, the Cash Flow Statement gives creditors, investors, and other parties

information that helps them make informed decisions. Ultimately, the firm's revenue

generation determines whether the business succeeds or fails.

The goal of presenting information in a timely manner is attempted to be achieved by

creating a cash flow statement. It displays an entity's liquidity position. In order to

evaluate a project's financial sustainability, a projected cash budget is created for the

project's estimated ten years ahead of time. Financial management is a topic that both

academics and working managers find quite interesting. Those and organizations with an

interest in cash flow statements include:

The primary buying and selling of goods and services by commercial firms is the focus of

operating operations. These activities include manufacturing, distribution, selling, and

marketing.

The third kind of cash flow statement activity is investing, which involves cash

transactions related to the acquisition or sale of investments. Money spent on long-term

assets, shares, debentures, etc., is included in these activities.

The primary financial activities of the company, such as trading company shares, paying

back investors, adding or modifying loans, or issuing new stock as needed, are what

constitute financing activities. Above all, these actions alter the form's capital and

borrowings.

Accounting staff, who must ascertain whether the company can afford to pay its

employees' salaries and other pressing costs. Prospective creditors or lenders seeking a

clear image of a business's capacity to pay Prospective investors must determine whether

the business is financially stable.

The company's shareholders

Prospective workers, who must ascertain whether the business can pay salaries.

Overview

Today's corporate environment is quite complicated. The management of the

organization and other stakeholders require access to high-quality information in order

for their decisions to be as effective and efficient as possible. To get specific information,

management might use a variety of management accounting technologies. External users

can see financial statements, but they are not allowed to utilize management accounting

to inform their actions. Information that can greatly aid in corporate decision-making is

produced by the analysis of the same.

In actuality, the Statement of Cash Flows is perceived as a subsidiary report, and the

Balance Sheet and Income Statement are frequently mentioned as the primary financial

statements. A unique report on cash flows was made specifically for that reason, keeping

in mind that the income statement and balance sheet do not discuss the cash flows of the

accounting period because of their accrual basis. Essentially, this report attempts to close

the gap between the cash cash receipts - issuance and accounting income - expenditure

results of activities. That is, it offers more information about the sources and uses of cash

that are involved in the reorganization of data found in the company's financial

statements. of the time frame under observation. Because it discusses the reporting
entity's liquidity, it can be concluded that the Cash Flow Statement is a crucial source of

information for decision-makers. This study contains information that, with the right

analysis, can greatly enhance business decision-making.

2. The start of reporting on cash flows

Cash flow reporting has a long history dating back to 1863. Even though the Dowlais Iron

Company was profitable that year, it had recently emerged from the economic collapse

and lacked the funds to purchase new blast furnaces. Despite the profits, the company's

director notes that there is not enough money to invest in a new blast furnace. He referred

to this as a comparison of the balance sheet in the financial report. It is believed that this

report comes before cash flow reporting.

The pivotal year in the creation of cash flow reporting history is 1971. This year, the USA's

generally accepted accounting standards, or US GAAP Generally Accepted Accounting

Principles, were defined by FAS B. Specifically, this defined the requirement to create a

Statement of Cash Flows as a required financial report included in the final account. It is

evident from looking at the history of cash flow reporting that there was no universal

definition of liquid assets for all types of economic organizations. During that period, net

current assets capital might refer to both cash on hand and assets that represented the
difference between current liabilities and current assets. As a result, the aforementioned

report's content varied greatly. Meigs & Meigs, 1999

Since cash flows do not always equal profitability flows—as we have already discussed—

such a report could not accurately depict the company's capacity to produce cash and pay

off its debts on schedule. Adoption of the 1987 SFAS 95, Statement of Changes in

Standards by the FASB

The Statement of Cash Flows was replaced by the Financial Position, which was more

tightly defined in terms of both form and content than the previous one. Kintzele, 1990

Regarding European rules, the Statement of Changes in Financial Position was prepared

in accordance with standard IAS 7 - Funds Flow Statement, which was adopted by the

International Accounting Standards Committee IASC in 1977. Revisions to this standard

were made in 1992 and published under the name Cash Flow Statement. Since 1994, this

standard has been used in the preparation and presentation of financial statements.

Shifting the information's center of gravity made it possible to estimate future cash flows,

which is now thought to be the main goal of financial reporting, as well as to offer

information on the inflow and outflow of cash firms during the accounting period.
3. The definition, essential components, and significance of reporting cash flows

A comprehensive collection of financial statements, comprising the cash flows statement,

income statement, statement of changes in equity, balance sheet, and notes, offers a

comprehensive view of the business's activities over a specified time frame. Users can

obtain insight into the company's financial position and earning potential based on the

traditional financial statements, balance sheet, and income statement. However, the

information in these reports is insufficient to analyze and evaluate all pertinent aspects

of the financial operations of the company, keeping in mind that the income statement's

stated business result is frequently not a reliable indicator of the company's ability to

generate cash.

Specifically, the difference between income and expenses allocated to the relevant

accounting period represents the impacts of activities covered on an accrual basis by the

income statement. The result profit reported in the income statement income and

expenses ratio typically differs from the result determined on a cash basis cash inflows

and outflows because of a greater or lesser discrepancy between income and inflows, i.e.

expenditures and outflows of money for a certain period. Therefore, despite the large net

profit displayed in the income statement, it is normal for businesses to experience a

decline in the cash balance and issues with sustaining current liquidity. All of this
indicates that accrual basis income statement results were adjusted to approach the net

cash inflows from the sales process activities in order to achieve successful cash flow

management. A Statement of Cash Flows was created specifically to meet these demands.

Stančić, 06, 3

One financial statement that helps you monitor the inflow and outflow of funds from your

organization is the cash flow statement. It is a crucial component of the company and an

excellent management and investor tool that illustrates how adjustments to the income

statement and balance sheet impact cash.

To arrive at a new cash balance at the end of the accounting period, the Statement of Cash

Flows essentially shows how everything that happened throughout the reporting period

influenced the cash balance shown in the balance sheet at the start of the reporting

period. Libby & Associates, 11: 638

In general, interested users can find the following information in this statement Kimmel

et al., 11, 15:

- the source of the cash during the reporting time,

- how money was spent throughout that time and

- How much cash was different at the end of the period than it was at the start.

When properly connected to data from other financial statements such as the income

statement, balance sheet, and some general ledger accounts, information from the cash

flow statement not only aids in the management of the business but also provides

external users with insight into the liquidity and solvency of the organization.

In order to maximize the success of the operations carried out, it is impossible to make

appropriate business decisions without knowledge of the company's cash flows. The

management uses this data to make a variety of business decisions, such as evaluating

dividend policy, assessing liquidity, evaluating the success of reaching goals, and

analyzing the contributions of investment and financing activities, regular activities, and

regular activities to overall business results.

This data is used by external users to evaluate the company's solvency, liquidity, debt

load, and business performance. As a result, stakeholders such as creditors, investors, and

the government can evaluate the company's profitability and the risk of doing business

with it.
Consequently, the data from the Cash Flow Statement aids users in:

- evaluate the company's capacity to produce cash and cash equivalents as well as its

requirements for using such inflows of funds;

- evaluate the extent to which the business can control the quantity and timing of cash

flows to adjust to evolving opportunities and conditions;

Balance sheet policy measures cannot, at least not directly, affect the amount of reported

net cash flow because cash flow eliminates the possibility of using different accounting

methods for the same transactions and events related to business activities. This makes

it possible to compare the business activities of other companies.

The assessments mentioned above can be used by the company's management to create:

- Corporate guidelines,

- Dividend guidelines and

- Strategies for investments.

The statement of cash flows helps management identify the fundamental lines of its

business activities by revealing information about the relationship between cash inflows

and outflows, the areas where investments are made, and the areas where they are

located that require cash. The management bases its dividend policy on the realized net

cash flow amount, and it will decide the investment policy based on the sources of cash.
Investors can obtain the necessary information from the Statement of Cash Flows to:

- evaluate the business's cash equivalent management capabilities,

It took into account the businesses potential to produce favourable future cash flows,

- evaluated his capacity to make required payments,

- evaluated the capacity to pay interest and dividends, and

It made it possible to foresee the requirement for more money.

The Report can also be used to clarify discrepancies between the net cash flows from

operating activities and the net profit or loss indicated in the income statement.

- What cash means

Defining cash as the primary component of the Statement of Cash Flows is crucial when

discussing it. According to Djukić 05, there are three possible interpretations of what

constitutes cash:

Narrowly understood cash refers to cash from the company's cash register, on the gyro

or current accounts, or money accessible for daily usage in the form of legal currency,

such as metal and paper money in someone's pocket population;

Widely understood cash refers to securities, which comprise time deposits with banks,

securities bought for long-term investment participation shares, and securities bought

for resale or commercial purposes;

Almost cash or cash equivalents are things that are neither narrowly understood cash nor

broadly understood cash, but may be swiftly and simply changed into known amounts of

money. Securities that aren't bought with the intention of reselling them or using the

money to invest them for a long time are considered cash equivalents. The most widely

used terms for currency equivalents are government bills, bonds, etc.

Assets are examples of cash equivalents Libby, 11, 638:

- Which is simple to exchange for predetermined sums of money and

- When there is a slight chance that an alteration in the interest rate will affect their value.

Various national standards have varying definitions for the terms cash and cash

equivalents. The following is the definition provided by the Financial Accounting

Standards Board FASB in SFAS 95, Statement of Cash Flows, Cash and Cash Equivalents:

IAS 7 states that cash comprises both demand deposits and cash. Cash equivalents are

very liquid, short-term investments with no risk of value fluctuations. They can be easily

converted into known sums of cash. Equivalents to cash are stored for short-term

obligations only; they are not kept for investments or other uses. An investment must be

free from the risk of large value fluctuations and be able to be easily converted into a

known amount of cash in order to qualify as cash equivalent. Consequently, it is typically

connected
exclusively with investments that have a short maturity, say three months or less, from

the date of acquisition, as cash equivalents. Except in cases where they are essentially

cash equivalents, such as when purchasing preference shares with a set redemption date

and a limited maturity period, equity investments are not considered cash equivalents.

- Cash flow classification based on activities

IAS 7 - Statement of Cash Flows states that any cash flows that the business realizes can

be classified as:

- Financial flows resulting from operational and business activity,

- Profits from investing ventures

- The money coming in from funding operations.

The Cash Flow Statement's users can do the following thanks to this categorization of

activities:

- Evaluation of how these actions affect the company's financial situation and

Evaluate how the various activities relate to one another.

As a result, these activities are used to determine the proportion of each group of

activities' cash inflows and outflows as well as their cash equivalents in the overall

business. This allows for the evaluation of each activity's contribution to the overall

financial outcome, while net cash flow indicates which activities contributed positively

and which negatively to the period's final cash balance.

Note that different classifications of cash flows resulting from a single transaction may be

applied when classifying transactions. When it comes to annuity payments, for instance,

the interest paid is seen as an outflow based on business activities, whereas the

installment amount is based on financing activities.

Note that transactions of a non-cash character—that is, those that alter the company's

assets and capital structure but do not directly affect current cash flows—will not be

shown in the Statement of Cash Flows. These are mostly financial and investment

transactions that don't involve the use of cash or cash equivalents. Examples of these

include moving funds between items that represent cash or cash equivalents e.g.,

transferring money from the cash register to the current account and converting short-

term loans into long-term loans.

Reporting on cash flows in the Serbian Republic

All legal companies and entrepreneurs registered in the Republic of Serbia are required

to produce all financial statements, including cash flow statements, in accordance with

the Law on Accounting of the Republic of Serbia from 19, which went into effect on

January 1, . The form used for the cash flow statement is created in compliance with IAS

7. In light of this, the following conclusions can be made:

- IAS 7 is the basis for compiling the mandated scheme;

- The Statement of Cash Flows was assembled using the direct approach, with a few

exceptions where net cash inflows and outflows were reported;

- The recommended form has 43 positions, of which 23 are for cash inflows and outflows

and are for subtotals, opening and closing balances of cash and cash equivalents, and

exchange rate disparities based on cash conversion.

4. Aspects of the report on cash flows: theoretical and methodological considerations

A thorough research, quantification, description, and assessment of the financial status

and performance of the company is what financial analysis entails[75]. The financial

statements, specifically the balance sheet, income statement, statement of cash flows,

statement of changes in equity, notes, and auditor's report found in the company's annual

report, are the focus of the examination. Other sections of the annual report, which are

optional, can also be found as the subject of study in addition to these required sections.

There are two categories of goals for the financial statement analysis: general goals and

specific goals. Knešević, 09, 5 The overarching objective in providing interested parties

with information relates to the evaluation of the income viability, performance, and

profitability organizations and their financial state status, cash flow, and capital changes.

Meeting the information needs of stakeholders is another goal of specific aims, however

these demands vary based on people's interests. Users of financial information include
managers, investors, staff members, lenders, suppliers, and other creditors; government

entities and the general public are also included. Krstić & Stojilković, 00, 12

As a functional and comprehensive collection of business processes that have taken place

in a single firm, financial statements are a set of data regarding the financial situation,

performance, changes in capital, and cash flows of a company. As such, they serve as the

foundation for any logical analysis. Knežević, 09, 9 Up until now, the Balance Sheet and

the Income Statement have received the most study; nevertheless, in the last few months,

the report on cash flows and the appendix have received more attention.

These financial statements are complimentary rather than alternative due to the variety

of information they offer. This essentially indicates that in order to do a thorough analysis

and evaluation of the company's financial situation and earning potential, all of them are

required.

Users can see a comprehensive picture of transactions based on financial, investment,

and business activities and how they affect cash flows by referring to the Cash Flow

Statement. The two primary sources of financial data are the income statement and

balance sheet. The income statement provides information about the company's

performance during a specific time period, whereas the balance sheet displays the
company's financial condition at a particular point in time. Nonetheless, among other

things, information on the company's solvency is of relevance to users of accounting data.

By using ratios based on the ratio of assets to liabilities, such as the following, one can

also derive this information using the balance sheet:

1. Ratio of quick liquidity or

2. Stringent ratio of current liquidity

These indicators' drawback is that their calculations are predicated on historical asset

and liability conditions. These static metrics of a company's liquidity are based on the

forced sale of its assets; they don't account for the company's existing capacity to earn a

profit. Djukić, 05, 164 Furthermore, we are unable to evaluate the solvency of the

business based solely on the income statement, as realized profit does not imply the

business will be able to settle its debts.

Thus, it is determined that the analysis of the cash flow statement is necessary for

evaluating the company's cash flows as well as its liquidity[80] and solvency[81]. The

cash flows from operating activities should be taken as a starting point if the company

achieves positive net cash flow from operating activities, as this indicates that the

company is able to generate up to oil and cash to pay your accounts without lending Meigs

& Meigs, 1999, 396.

Since the study of the Cash Flow Statement is dynamic in nature, it can offer information

on the following Pavlović, 12, 45, particularly when it comes to the portion of the

statement pertaining to cash flows from operating activities:

- The ability of the business to make money from its operations.

- Net cash flow trends.

The primary determinants of either positive or negative net cash flows.

- Cash flow analysis techniques and tools

The foundation of cash flow analysis is the application of certain techniques and tools.

There are two fundamental and two supplementary techniques of analysis Djukić, 05,

167:

- Decomposition technique;

- Comparative approach;

- Isolation technique and

The synthesis technique.

The standard breakdown of the Cash Flow Statement by its activities into: business,

investment, and financial activities allows one to see how each of these activities

contributes to achieving net cash flow positive or negative. In addition to the basic

breakdown of cash flows by activity, there is also the option to break down the cash flows

according to the aspect of their sources, i.e., the activities that led to their generation.
money flows into cash inflows and outflows, followed by period months, quarters,

semesters, or topic.

By using the isolation method, one can learn more about the critical elements that

determine the company's business success by conducting a more thorough analysis of a

particular phenomenon—which may be positive or negative—and identifying the causes

of it.

The synthesis approach is used to compare the cash flows of the company with the

industry average and is useful for taking into account the overall cash flows of

competitors. It gives aggregate data from multiple consecutive periods that have

previously been the subject of comparison.

The following tools are available for analyzing the Cash Flow Statement Djukić, 05, 64:

1. Visual and

2. ratio-number analysis.

One of the first techniques for analyzing financial statements is visual analysis. Its

simplicity makes it ideal for obtaining a broad overview of a company's cash flows, as

data from the Cash Flow Statement are displayed as graphs, allowing for evaluations and

broad inferences about the flow and condition of cash within the business.
One of the most widely used financial analysis tools is ratio analysis. Aside from the ratio

analysis based on the income statement and balance sheet, the ratio analysis based on the

cash flow statement has gained significant importance recently. Financial indicators

based on cash flow can be categorized into four groups Djukić, 05, 64-67:

a The ratios of solvency and liquidity;

Indicators of profit quality b;

c Indicators for capital expenditures

d Indicators of cash flow return.

a The monetary coverage of interest, current liabilities, total liabilities, and dividends is

discussed by liquidity and solvency ratios, which comprise the following indicators:

1. The current cash debt coverage ratio, or the coefficient of covering of short-term

liabilities;

2. Ratio of Cash Debt Coverage;

3. Ratio of Cash Interest Coverage;

4. Coverage Ratio for Cash Dividends.

A larger coefficient indicates that the business is working successfully; a value of 40%

indicates sufficient liquidity. This ratio illustrates how much cash from business activities

is covered by each monetary unit of short-term liabilities Samuels, 1995, 17.

The preferred value of this coefficient is % or more. It indicates the company's ability to

pay its debts with the money it makes from conducting business activities, or how many

monetary units of net cash flow from operating activities is covered by each monetary

unit of liabilities. Stickney & Weil, 00, 258

A company's ability to pay interest on its entire debt is demonstrated by the cash interest

coverage ratio, which is computed as follows: net cash flows from operating operations +

interest paid + taxes paid = interest paid

This coefficient's value is not known with precision, but it should ideally be larger than 1.

If it is less than 1, it indicates that the company is not making interest payments to the

business, which necessitates the acquisition of funds from outside sources.

The cash dividend coverage ratio is a useful tool for shareholders as it illustrates the

company's ability to pay dividends from cash opportunities based on business activities.

It does this by displaying the number of monetary units realized on the basis of the

business activities of the company that are covered by each monetary unit of paid

dividends: 𝐶𝐶𝐶ℎ 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶 = Net cash flows from operating

activitiesDividends paid
According to Mitchell et al. 1995, 59, if the ratio's value is less than 1, the company will

have to borrow money to cover its dividend obligations, which will send the wrong

message to potential investors.

b Measures of profit quality include the ratio of cash inflows to profits and the ratio of

cash inflows to sales revenues and operating activities Mitchell et al. 1995, 60.

1. Revenue Quality Ratio and

2. Earnings Ratio Quality.

The relationship between cash inflows from sales and sales revenues is represented by

the sales quality ratio, which can be used to determine how much sales revenue is

collected or converted into cash over the course of the accounting period: 𝐶𝐶𝐶𝐶𝐶

𝐶𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶 = Cash inflows from salesS𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶𝐶

A ratio of 1 would be ideal because it would mean that all sales made during the period

would be collected in the same period. This can only be achieved by businesses that

charge in advance for services or sell their goods for cash; in all other cases, it is

preferable that this coefficient weighs on the unit Sylvestre, 1994, 65.
The relationship between operating profit and net cash flow from operating activities is

represented by the profit quality ratio: operating profit = net cash flows from operating

activities − 𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶𝐶 or Net cash flow from operating activities before interest

and taxes = Operating profit before interest and taxes

1. The Operating Cash Flow to Capital Expenditures Ratio, or capital costs ratio;

2. The ratio of outflows from investments to outflows overall Investing Outflow to Total

Outflow;

3. The connection investing to Operating and Financing between business and financial

activity;

4. The connection between financial activities and investments investing to Financing.

This ratio is used to calculate the percentage difference between the operating profit of

the accounting period and the net cash flow from operating activities of the same period,

or to calculate the disparity between the profit reported in the income statement and the

net cash flows generated from operating activities Sylvestre, 1994, 65.

Indicators of capital expenditure connect specific forms of cash flows to evaluate the

capacity to get investment and financing in addition to capital asset acquisition Mitchell

et al. 1995, 59:

The goal of the capital costs ratio is to demonstrate the company's capacity to pay for

costs associated with capital expenditures: net cash flows from operational operations -

cash outflows for capital expenditures e

Since the net cash flow from operating activities is only used for investments after money

meant for dividend payments is subtracted, a stricter alternative to this ratio accounts for

the company's duty to shareholders: 𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶 = NetNet cash flow from

operating activities − dividends paidCash outflows for capital expenditures

Based on the success of routine activities, the company can create enough cash to finance

investments if the coefficient value is equal to or greater than 1. If not, it needs to look for

other sources of funding.

This coefficient has no set value, but it must be observed in the context of temporal and

spatial analysis to provide insight into the existence of an investment plan in production

modernization to bolster competitiveness.

The reciprocal value of this coefficient indicates how many monetary units realized on

the basis of financial activities are covered by each monetary unit of investment activities.

If the value of this coefficient is 1, it indicates that the entire amount of funds realized on

the basis of financing activities is invested in investment activities.

Indicators of cash flow return include Mitchell et al. 1995, 59:

1. The amount of cash flow per share

2. Return on Cash for Assets and

3. Return on Cash for Stockholders.

The following formula is used to determine cash flow per share:

𝐶𝐶𝐶ℎ 𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶 𝐶ℎ 𝐶𝐶𝐶 =𝐶𝐶𝐶 𝐶𝐶𝐶ℎ 𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 −

𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶 𝐶𝐶 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐶ℎ 𝐶𝐶𝐶𝐶Average number of ordinary shares

This ratio, which displays how many units of net profit are collected to cover each share

of common shareholders, is comparable to the profits per share ratio.

The return on invested assets measures the company's ability to generate a certain net

cash flow based on the invested assets through the performance of business activities. It

is calculated as the ratio of net cash flow from operating activities to total assets.

The amount of net cash flow from operational activities before interest and taxes is equal

to the sum of the following: T

The longer the time period for return on invested assets from cash created from operating

activities, the higher the coefficient's value indicates how successfully the company

generates cash flow with the aid of invested money.

The ability of the business to return equity from net cash flow from operating activities

is demonstrated by return on equity ROE = net cash flows from operational activityEquity

share capital
We may determine which portion of the invested stock will be repaid from the cash flow

produced by business operations using this ratio.

When analyzing the attractiveness of the company's shares in the financial markets,

investors are happy to use free cash flow as a significant indicator of the company's

success. Free cash flow is defined as the balance of cash from operating activities after

dividends are paid and after investments are made in the company's expansion. The cash

flow is calculated using the following formula:

Net cash flows from operating operations - Dividends - Net investments in fixed assets

equals free cash flow.

Following the study of the Cash Flow Statement, the company's cash flow profile can be

determined. All organizations fall into one of eight profiles based on the outcomes

attained from their financial, investment, and business operations.

Review of the Literature

In order to calculate cash flow from operations, a number of non-cash items that are

included in the calculation of net income and total assets and liabilities on the balance

sheet must be reevaluated because not all transactions involve actual cash items. These

adjustments are made by adding or subtracting differences in revenue, expense, and

credit transaction resulting from transaction that occurs from one period to the next.

Thomas Zeeker and Brian Stank 1990 This study investigates if the cash flow ratio can be

helpful in analyzing retail sellers' financial ratios.

The research was carried out using primary data from the study.

The study discovered that retail sellers' cash flow statements are helpful in determining

financial ratios.

It also discovered that, in addition to the accrual basis of accounting, new and traditional

accounting techniques should be used to evaluate the financial position and overall state

of the retail company.

RESEARCH METHODOLOGY

The study's goal

 To research the company's cash flow situation

 To evaluate the company's different financial, investment, and operating activities

 To ascertain the theoretical components of cash flow analysis and comprehend

variations in the allocation of resources.

Methodology and research

Utilizing both required and optional data, the inquiry was conducted between the years

of 17–18 and 19– for a total of three years. The majority of the extra information in this

article is obtained. Extra data was obtained from the accompanying sources, which

include yearly reports, dairy products, money streams, and other relevant websites. The

technique is a methodical process of gathering data to examine and validate a remarkable.

The gathering of data in two methods.

 Principal Information

 Primary data are those that have been gathered from first-hand experience.

 Secondary information
Secondary data is information gathered from a source that is already publicly available

about a company. Examples of this type of information include company records,

brochures, and other documents, newspapers, websites, and so on.

Interpretation and analysis of data

Conducting operations from 17–18 until 19–

1. Years 2. Operating activities

3. 15-16 4. 18095550

5. 16-17 6. 35191230

7. 17-18 8. 23874767

9. 18-19 10. 25399768

11. 19- 12. 16996810

Interpretation

In the following picture, the operating activities are increasing in a positive way year over

year. From 17–18 to 18–19, the increasing ratio appears to be consistent, while from 18–
19 to 19–, the falling ratio is more than in prior years, but it still demonstrates the firm's

ongoing development.

Investing activities from 17–18 through 18–

1. Years 2. Investing activities

3. 15-16 4. 54854744

5. 16-17 6. 39884094

7. 17-18 8. 84854744

9. 18-19 10. 70630653

11. 19- 12. 210199372

Interpretation

The investing activities over the previous three years are displayed in the diagram above.

It demonstrates how the corporation allocates funds to different endeavors. Looking at

the above graph, we can see that the proportion of funds invested decreased steadily from

17–18 to 19–.
The company managed these investments. it demonstrates the prior year's high

investment.

1. Years 2. Financing activities

3. 15-16 4. 90476400

5. 16-17 6. 68414041

7. 17-18 8. 147640

9. 18-19 10. 12377069

11. 19- 12. 339557

Finance-related operations from 17–18 to 19–

Interpretation
The company's financing activities as listed above demonstrate how they have been

conducting their financial operations. From 17–18 through 18–19 and 19–, the

company's financial operations grew, but as the diagram illustrates, they then decreased

in intensity.

Results and conclusion

Since net profits have been rising over the years, they are good; nevertheless, after that,

they have been falling.

The operations are going well. This ratio is declining since production costs are rising.

Therefore, it must lower its office administrative costs and improve position, making

appropriate use of cash. It is advised to raise awareness in order to boost sales. Mechanics

with lower costs can be hired. It is possible to use better production techniques.

The purchase of fixed assets has made good use of the cash flow. Consequently, the

financial situation is favorable.

Conclusion
The cash flow statement provides information on the net change in cash and cash

equivalents in the special treatments as well as the change in cash and cash equivalents

in operating, investing, and financing operations increase/decrease. It also includes the

net change in cash throughout the course of the time. The closing balance of the cash and

cash equivalents is what's left over after the opening cash and cash equivalents are added

to this net change.8 The income statement is used to determine the difference between

the firm's revenue and income, while the cash flow statement shows how the cash was

used during a specific time period. The cash flow statement provides a clear picture of

how working capital is used. The cash flow statement is regarded as a typical financial

statement that shows the company's financial health. Some managers lack the skills

necessary to handle cash and cash equivalents, which prevents them from investing their

portion in the specialized company in order to profit from it. For these managers, the cash

flow statement will be quite helpful.

References