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A

PROJECT REPORT
ON
CASH FLOW STATEMENT & RATIO ANALYSIS
For
GUJARAT ALKALIES & CHEMICAL LIMITED
Submitted to
C.K.SHAH VIJAPURWALA INSTITUTE OF MANAGEMENT
IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF THE AWARD FOR THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
Under
Gujarat Technological University
UNDER THE GUIDANCE OF
Faculty Guide

Company Guide

Ms.Stuti Trivedi

Mr.A.K.Mishra

Assistant Lecturer

Finance Officer
Submitted by
Dhruti R.Bhatt
Enrollment No.:107050592071
M.B.A.-SEMESTER

C.K.Shah Vijapurwala Institute of Management


M.B.A. PROGRAMME
Affiliated to Gujarat Technological University
Ahmedabad
July 2011
1

PREFACE

In the present fast moving, globalize economy, only theoretical


knowledge is not sufficient for an individual to perform efficiently to bridge the
gap between theory and practical.

The students are required to undergo training in any organization in


subjects like marketing, finance, human resources or information technology.

Summer Internship Program is a Prelude to the final placements that


the students will be getting. It is during these fourty-five days of exposure to
the industry that the student can make a mark of hard-work, sincerity,
knowledge and ethics on the host organization.

Summer Internship Program would also be a great learning experience


since it enables the students to apply theory to practice, observe, and learn
the current trends in the market.

Therefore, in order to have a practical exposure, I have been placed in


GUJARAT ALKALIES & CHEMICAL LIMITED. company for my Summer
Internship Program, as my specialization is FINANCE.

ACKNOWLEDGEMENT

It is a universal truth that NO PREPARATION IN ANY WORK CAN BE


OBTAINED WITHOUT INSPIRATION. For successful completion of any
work, you may need requisite guidelines.

First of all,I like to extend sincere thanks to Ms.Ishita Ashara, Faculty of


C.K.Shah Vijapurwala Institute of Management, Vadodara for providing
me an opportunity to undertake this project & giving me her valuable
guidance.

I am very thankful to Shri Rajkumar Emmunal, Manager (Human Resource


Department) who has permitted me to undertake all activities associated with
my project during office hours.

I am also thankful to my sectional head Mr.A.K.Mishra, Manager (Finance


Department) who has provided me necessary guidance regarding my topic.

I am also thankful to C.K.Shah Vijapurwala Institute of Management,


Vadodara for providing me a golden opportunity to attain the professional
qualification in the field of Financial Management.

I also like to extend sincere thanks to Gujarat Technological University,


Ahmedabad for introducing such type of training in M.B.A. syllabus.

DECLARATION

I Dhruti R.Bhatt, herby declare that the report for Summer Training
Project entitled Cash Flow Statement is a report of my own hard my own
hard work and my indebtedness to other work publications, referances, if any,
have been acknowleged.
Place: Vadodara
Date: 28/7/11

Dhruti R. Bhatt

EXECUTIVE SUMMARY

This project contains bird view about global chemical industry, details of Gujarat
Alkalies & Chemical Ltd, details about Caustic soda and status of chemical market
in India.

In section of Indian chemical industry, I have put details about introduction, history,
major domestic and global chemical market, various types of chemical product,
various demand detail and analysis of finance sector. Moreover, I have taken
Gujarat Alkalies & Chemical Ltd for company study. It contains details like
introduction, company profile, product profile and also details about various functional
departments.

This project gave an idea about future research related to Cash Flow Statment.This
project taught us how we can use secondary data and relate it to find out any details.

TABLE OF CONTENTS
PREFACE
ACKNOWLEDGEMENT
DECLARATION

SR.NO.

PARTICULARS

PAGE NOS.

PART-1 GENERAL INFORMATION


1

About GACL
1.1 GACL History

10

1.2 World Market

21

1.3 Indian Market

23

1.4 Growth of GACL

25

1.5 SWOT Analysis of GACL

26

About major companies in the Industry

28

Product Profile

29

PART-2 PRIMARY STUDY


4

4.1Introduction of the study

34

4.2 Literature Review

36

4.3 Background Information

37

4.4 Objectives of the study

41

4.5 Specimen of Cash Flow Statment

43

Data Analysis and Interpretation

47

Result & Findings

64

Limitation of the Study

65

Conclusion/Suggestions

66

ANNEXTURE
REFERENCE

LIST OF TABLES
SR. NO.

PARTICULARS

TABLE NO.

PAGE NO.

1.
2.
3.

Export Oriented Countries of GACL


Product Analysis
Formate of Cash Flow Statment:
Indirect Method
Formate of Cash Flow Statment: Direct
Method
Cash Flow Statment of GACL
Cash Flow Margin Ratio
Free Cash Flow to Operating Cash Flow
Ratio
Short term Debt Coverage Ratio
Capital Expenditure Coverage Ratio
Dividend Payout Ratio
Operating Cash Flow Ratio

1
2
3

22
30
42

44

5
6
7

46
51
53

8
9
10
11

56
58
61
62

4.
5.
6.
7.
8.
9.
10.
11.

LIST OF GRAPHS
SR. NO.
1.
2.
3.
4.
5.
6.

PARTICULARS
Cash Flow Margin Ratio
Free Cash Flow to Operating Cash Flow
Ratio
Short term Debt Coverage Ratio
Capital Expenditure Coverage Ratio
Dividend Payout Ratio
Operating Cash Flow Ratio

GRAPH NO.

PAGE NO.

1
2

51
56

3
4
5
6

57
59
62
63

PART- 1
GENERAL INFORMATION

1.1 ABOUT GACL


GACL HISTORY:

Gujarat Alkalis and Chemicals Limited (GACL) were incorporated on


29th March, 1973 in the State of Gujarat by Gujarat Industrial Investment
Corporation Limited (GIIC), a wholly owned company of Govt. of Gujarat, as a
Core Promoter.

GACL has two units located at Vadodara and Dahej, both in the State
of Gujarat. It has integrated manufacturing facilities for Caustic Soda,
Chlorine, Hydrogen Gas, Hydrochloric Acid, Chloromethanes, Hydrogen
Peroxide, Phosphoric Acid, Potassium Hydroxide, Potassium Carbonate,
Sodium Cyanide, and Sodium Ferrocyanide. The Dahej unit also has 90 MW
Captive Power Plant (CPP) for regular and economical power supply.

The Company commenced its operations in 1976 with 37,425 MTPA


Caustic Soda Plant based on the then, state-of-the-art Mercury Cell process
at its Plant which is situated 16 km North of Vadodara near Village Ranoli on
the main Railway track route between Ahmedabad and Mumbai.

Right from the inception, GACL has been following the strategy of
continuous capacity expansion in core areas. The first stage expansion of the
Caustic Soda Plant raising the capacity to 70,425 MTPA was undertaken in
October, 1981 followed by a diversification programme to produce 2000
MTPA of Sodium Cyanide in December, 1982.

In 1984, the second stage expansion to increase the capacity of


Caustic Soda Plant to 103,425 MTPA was undertaken. Simultaneously, the
9

Company undertook the diversification project for manufacture of 10,560


MTPA of Chloromethanes using Chlorine, a co-product of the Company and
in 1991, the capacity of Chloromethanes production was doubled.

As power is the major input for production of Caustic Soda and


constitutes about 65% to 70% of the cost of production, the Company along
with other Corporations like M/s. GSFC, Petrofils Co-operative Ltd. and
Gujarat Electricity Board promoted a gas based power unit in Vadodara under
the name of Gujarat Industrial Power Company Ltd. (GIPCL) during the year
1985. As a promoter of GIPCL, the Company gets low cost power, as the
plant is gas based and is depreciated.

Since production of Caustic Soda is highly power intensive, in order to


reduce power cost and to eliminate mercury pollution, the Company, during
the year 1989, converted one of its Cell Houses producing Caustic Soda from
Mercury Cell Technology to environment friendly Membrane Cell Technology,
thereby eliminating the use of mercury. The Capacity of Caustic Soda was
increased to 132000 MTA.

The conversion of second Mercury Cell to Membrane Cell was carried


out during March, 1994, thereby eliminating the total use of mercury from the
Complex for production of Caustic Soda and increasing the capacity of plant
along with this conversion to 170000 MTA including Potassium Hydroxide
facility.

As part of this Membrane Cell Conversion Project, a new facility for


manufacture of 16500 MTA of Potassium Hydroxide Lye based on Membrane
Cell was also set up. The Company has further set up facility for converting
part of this Caustic Potash Lye into Potassium Carbonate with a capacity of
13200 MTA.
10

In order to add further value to its products, the company had set up
manufacturing facility for production of 11000 MTA Hydrogen Peroxide
(100%) at Vadodara Complex during the year 1996 to utilize Hydrogen gas,
which is a co-product from Caustic Soda Process.

In 1995, as a part of diversification programme and to meet the


growing demand of its products in the State of Gujarat and nearby areas, the
Company had set up a plant for manufacture of Technical Grade Phosphoric
Acid with capacity of 26400 MTA "(85% Phosphoric Acid) at a new location at
Dahej, District Bharuch. The Company also set up Membrane Cell based
grass root Caustic-Chlorine Unit with a capacity of 100000 MTA at Dahej.
Along with this, a captive 90 MW co-generation Power Plant was set up so as
to ensure uninterrupted and low cost power for its captive operation.

11

COMPANY PROFILE:

NAME:GUJARAT ALKILIES & CHEMICAL LIMITED (GACL)

REGISTERED OFFICE:P.O. Petrochemicals -391346


Dist -Vadodara
Gujarat (INDIA)
Pin-391346

VADODARA COMPLEX:P.O. Petrochemicals -391 346


Dist Vadodara
Gujarat (INDIA)
Pin-391346
Phone - (0265) - 2232681 -82 / 2232701

DAHEJ COMPLEX:Village: Dahej -392 130


Tal: Yagra
Dist: Bharuch
Gujarat (INDIA)
Phone -(02647) - 256315-16-17 / 256235

FORM OF ORGANISATION:Joint Venture

SIZE OF ORGANISATION:Large Scale Organisation

AUDITIORS:Messers Prakash Chandra Jain & Co.


Chartered Accountants,
Vadodara

SOLICITORS:Messers Amarchand & Mangaldas


& Suresh A. Shroff & Co.

12

COST AUDITORS:Messers Diwanji & Associate


Cost Accountants
Vadodara.

COMPANY SECRETARY & GENERAL MANAGER:Shri. V.L.Vyas

BOARDS OF DIRECTORS:Dr. ManjulaSubramaniam (I.A.S) Chairman


Shri V.I.Joshi (I.A.S)
Shri G.C.Murmu (I.A.S)
Shri G.M.Yadwadkar
Dr. Sukh Dev
Shri Guruprasad Mohapatra (I.A.S.). Managing Director

BANKERS:State Bank of India


Central bank of India
AXIS Bank Ltd. (UTI)
IDBI Bank Ltd.
UCO Bank
Indian Bank
HDFC Bank Ltd.

13

POLICIES ADOPTED BY GACL:


1. SHE Policy:

14

2. Supply Chain Policy:

15

3. Training & Development Policy:

16

4. Information Technology Policy:

17

5. Quality Policy:

18

ORGANISATION STRCTURE:

MD

Sr.ED
(Tech.)

GM(Pe
rsonnel
)

CS &

CGM(
Materia
l Mgt.l)

Chief
(financ
e
officer)

DGM

DGM

GM

(Secre
tarial)

(MM)

(Finan
ce - 2)

GM
(Legal)

DG
M(P
&
IR)

DGM
(Financ
e - 2)

CGM
(Dahej)

GM

GM
(Eng.
Service
)

DGM
(Mech)

GM(S
ecurity
&

Vigila
nce)

DGM
(Inst.)

GM
(Elect.
)

DGM
(Elect)

(Engg.

Serv.)

DGM
(Opera
tion -4)

DGM
(Elect.)

19

GM
(Safety
&

Env.)

I/C
GM
(Opera
tion S
-2))

DGM
(Oper 3)

ED
(Com
mercial)

GM(M
S.Adm
. HRD)

GM
(Mktg
)

GM
(Corpor
ate
Plann)

DGM
(Corpor
ate
Plann)

DGM
(Mktg.)

1.2 WORLD MARKET


EXPORT:
GACL is exporting various goods to other countries.

Export: Raw materials are purchased from India only but its ultimate food is to

sent, out of India as finished foods, are treated as export orient unit(EOU).

Deemed Export: Finished goods are sold within the country only but outside Gujarat in
another state.

Consignment Sales: Transfer of raw materials, semi-finished goods from one branch to

other. There is no service tax charged.


Export finance is done by commercial banks in two phases, namely
pre-shipment and post-shipment. Mostly the medium and small scale
exporters who required working capital for buying raw material and buying
manufacturing expenses generally required pre-shipment finance. It is rupee
finance provided by the commercial banks on the basis of the confirmed
export order. It is presently available at 9% rate of interest, which is must
lower than the commercial rate charge by the banks for extending credit for
domestic trade.

20

GACL's export destinated countries:


Export Destinated Countries
Table No.1

Export Item

Country

Caustic Soda

African Countries

Chlorine

Australia

Hydrochloric acid

China

Potassium Carbonate

Europe

Methaline chlorine

East countries

Chloroform

Latin American Countries

Phosphoric acid

Middle east

Sodium Cyanide

Mauritius

Hydrogen peroxide

South Asia

Aluminum chloride

USA

21

1.3 Indian Market

GACL is one of the largest producers of caustic soda in India with a


market share of 18% in the domestic chlor-alkali market.

It has an installed production capacity of 4,29,000 metric tons (MT) of


caustic soda as on 31st March, 2010. The companys caustic soda group
includes caustic soda lye, caustic soda flakes, caustic soda prills, sodium
hypo chlorite, liquid chlorine, compressed hydrogen, gas and hydrochloric
acid.

GACL has capicity expansion plans of about Rs.26 bn for various projects
for next three to four years.

The company is putting up a 600 tons per day (TPD) chlor-alkali project,
20,000 tons per annum (TPA) sodium chlorate project, 100MW captive cogeneration power plant, 8000 TPA hydrazine hydrate project and 150
KTPA polyols project. The projects are progressing as per schedule and
expected to commence by Fnancial Year 2014. Also the company has
taken up an expansion of its existing hydrogen peroxide project to
increase the capacity by 14000 TPA and project scheduled for commission
in Financial Year 2011.

The company is a multi-product company and has more than 27 products


in their product portfolio.

The company manufactures various basic chemicals like chloromethanes,


sodium cyanide, sodium ferro cyanide, hydrochloric acid, caustic potash,
potassium carbonate, phosphoric acid (85%), hydrogen peroxide, poly
aluminum chloride, anhydrous aluminum chloride and many more.

GACL drives 65% of its revenue from chlor-alkali business and 35% from
other products

Key risks in Indian Market:

Timely and successful completion of expansion projects

Intense competition from domestic as well as international market

Rise in raw material prices due to scarcity in the global market

Increasing power & fuel cost which is major input for production of
caustic soda

Foreign exchange fluctuation


22

1.4 GROWTH OF GACL

GROWTH STRATEGY:

To remain the largest producer.

To maintain highest quality & be the first choice of customer.

To remain in the lowest production through captive power.

To have down stream value added products & flexibility of product


mix for better margins & wide market.

To ultimate good to remain leader in the chlor alkalis.

VISION:
To continue to be identified & recognized as dynamic, modern & eco
friendly chemicals company with enduring ethics & values.
MISSION:

To manage business responsibility & sensitivity in order to address the


needs of customers & stakeholders.
To strive for continuous improvement performance, measuring results
precisely & ensuring GACL's growth & profitability through innovations.
To achieve the highest ethical standards and to ensure products &
processes to be of the highest quality.

23

1.5 SWOT ANALYSIS OF GACL

STRENGTH :

Single largest caustic soda producer in the country coin a capacity of


27000 TPA having industry share of 13.75%

Leader in chlor-alkali industry

Low cost power from GIPCL Baroda

Integrated down stream plants

In house research and development

Dedicated men power

Proximity to raw material source and market

Excellent industry relation

Strong and committed work force

The company has been awarded ISO9001:2000certificated from 20th


Nov.03

Nationals award by government of India 1993 for contribution of R &


D department of the company in the pollution control environment
protection.

WEAKNESS:

High Price.

Highly power intensive products as power.

Company's products are in commodity group and therefore the prices


are purely market driven.

The supply of natural gas for the power plants varies depending upon
availability.

24

OPPORTUNITY:

Foreign market the demand for company's products in foreign market


is high therefore GACL has golden opportunity to gain share market
by exporting its products to foreign countries.

Excess capacity in power plant will help in setting up down stream


projects for increasing the capacity of caustic soda production.

THREATS:

The chlore alkali industry in cyclical in nature

The industry has faced with over capacity in the country

Dependence on the performance of consuming sectors

Threats of impact of slow down Indian economic growth

Highly competition market for the products of the company

25

2. ABOUT MAJOR COMPANIES IN THE INDUSTRY

COMPETITORS:
GACL'S major competitors are:

Atul Product Limited

Comfad Alkails Limited

Century Chemical Limited

Tata Chemicals Limited

Saurashtra Chemicals Limited

Gujarat Heavy Chemical Limited

Southen Petrochemicals Industry Limited

Modi Alkalis And Chemical Limited

CUSTOMERS:
Distribution channel:
FERTILIZER:

Gujarat State Fertilizer Corporation

Gujarat National Fertilizer Corporation

IFFCO

Deepak Nitrite

Deepak Fertilizer

PHARMACUTICALS:

Dr. Reddy's

Aurbide Pharma

Turrent

Runbuxy

Cadila

San Pharma

Lupin Laboratory
26

TEXTILE:

Arvid Mills Limited

Ashima Industires Limited

AGRO-CHEMICALS:

Gujarat Agrom Chemicals Limited

BildgChemicals

Arti Industries

MeghumaniOrganics

Tagro

REFINERY:

IOC

IPCL

Reliance Hajira Jamanagar

DETERGENT

HLL

Godrej

WFLimited

Nepal Lever

Nirma

PAPERS:

BILT

Rama New Print

TamilNadu Pup Industries

JK Paper

27

3. PRODUCT PROFILE
1. Caustic Soda Lye
2. Caustic Soda Flakes
3. Caustic Soda Prills
4. Liquid Chlorine
5. Hydrochloric Acid
6. Sodium Hypochloride
7. Sodium Cyanide

8. Sodium Ferrocyanide
9. Caustic Potash Lye
10. Caustic Potash Flakes
11. Potassium Carbonate
12. Poly Aluminum Chloride
13. Chlorinated Paraffin Wax
14. Methyl Chloride
15. Methylene Chloride
16. Chloroform
17. Carbon Tetrachloride
18. Phosphoric Acid
19. Hydrogen Peroxide
20. Compressed Hydrogen Gas
21. Dilute Sulpharic Acid
22. Scalewin
23. Bleachwin
24. Aluminum Chloride
25. Calcium Chloride Powder

28

PRODUCT ANALYSIS
Table No.2
Sr.

Name of product

Product

Consumption /

No

Place

Sales
Main

By Product

Own

Customer

India

Both

Caustic soda lyes

Caustic soda flakes

Caustic soda prills

Liquid chlorine

Hydrochloric acid

Sodium hypochloride

Compressed

hydrogen

Dilute sulpharic acid

Aluminum, chlorine,

10 Chloride paraffin wax

11 Sodium cyanide

anhydrous

12 Sodium Ferrocyanide

13 Caustic Potash Lye

14 Caustic Potash

15 Potassium carbonate

16 Methaline chloride

17 Chloroform

18 Carbon tetrachloride

19 Phosphoric Acid

Flakes

20 Calcium chlorine

Powder
29

21 Hydrogen Peroxide

22 Bleachwin

23 Scalewin

24 Poly Aluminum

Chloride

30

PART- 2
PRIMARY STUDY

4.1 INTRODUCTION OF THE STUDY

WHAT DOES CASH FLOW MEAN?

Cash that comes into or goes out of a persons or companys account.


In investments, cash flow represents earnings before depreciation,
amortization and non-cash charges. Sometimes called cash earnings.
Cash flow from operations is important because it indicates the ability to
pay dividends.

WHAT DOES CASH FLOW STATEMENT MEAN?

Cash Flow Statement is one of the quarterly financial reports any publicly
traded company is required to disclose to the public. The document
provides aggregate data regarding all cash inflows a company receives
from both its ongoing operations and external investment sources, as well
as all cash outflows that pay for business activities and investments during
a given quarter.
It answers the questions Where the money came (will come) from? And
where it went (will go)?
Cash flow statements assess the amount, timing, and predictability of cashinflows and cash-outflows, and are used as the basis for budgeting and
business-planning.
In cash flow statement the accounting data is presented usually in three
main sections:
(1) Operating-activities (sales of goods or services),
(2) Investing-activities (sale or purchase of an asset), and
(3) Financing-activities (borrowings, or sale of common stock).

Together, these sections show the overall (net) change in the firm's cashflow for the period the statement is prepared.

4.2 LITERATURE REVIEW


Multi Line Industry
Conglomerates Family Firm
In GCS Industry
Category Busine & Chemical

Cash Flow Statement is an important ingredient in the smooth working of


businesss entities, it has not attracted much attention of scholars. Whatever
studies have conducted, those have exercised profound influence on the
understanding of cash flow statement good number of these studies which
pioneered work in this area have been conducted abroad, following which,
Indian Scholars have also conducted research studies exploring various
aspects of working capital. Special Studies have been undertaken, mostly
economists, to study the total cash position.

After Analysis of the various reports, I have observed that each research
paper make with their own nature. These types of different papers teach me
many things. These papers gave me idea about the base of financial
planning. It also tells about which activity is more important for company and
vice-versa.

I also came to know how activities of finance department are managed by


manager in a proper manner. They also give me idea about the various
assumptions and limitations of working capital management.
According to me, cash position in the company must receive little attention
and yielding more significant results. Cash flow management is important
because of its effects on the firms profitability and risk, and consequently its
value. Greater the investment in current assets, the lower the risk, but also the
lower the profitability obtained.

4.3 BACKGROUND OF CASH FLOW

SCOPE OF THE CASH FLOW STATEMENT:


1. An entity which prepares and presents financial statements under the
accrual basis of accounting should prepare a cash flow statement in
accordance with the requirements of the Standard and should present it as an
integral part of its financial statements for each period for which financial
statements are presented.
2. Information about cash flows may be useful to users of an entitys financial
statements in assessing the entitys cash flows, assessing the entitys
compliance with legislation and regulations and for making decisions about
whether to provide
resources to, or enter into transactions with an entity. They are generally
interested in how the entity generates and uses cash and cash equivalents.
3. The Accounting Standard (AS-3) applies to all public sector entities other
than Government Business Enterprises.
4. Consolidated cash flow is a financial statement that presents information
about the companys cash receipts and disbursements during the accounting
period.
5. The purpose of cash flow statement is to provide information on sources
and uses of cash and cash equivalents during the period of accounting and
cash reconciliation at the beginning of the period with cash at the end of the
period plus the cash equivalent balances.

NEED OF CASH FLOW STATEMENT:

1. A cash flow statement is the motor oil for any business finance engine. It
measures the amounts of money that come into a company and out of it over
a given time period. This way a company is able to keep track of how much
cash it has on hand to pay expenses and buy assets.
2. Cash flow statements use information from both income statements and
balance sheets. Using this information, the cash flow statement will reveal the
net increase or decrease in cash for the period. Most cash flow statements

are divided into three separate activities: operating activities, investing


activities, and financing activities.
(i) Operating Activities
Operating activities shows cash flow from net income to net losses to
cash used in and for operation procedures. Sometimes, non- cash items are
adjusted for any cash that was used or provided by utilizing other operating
assets and liabilities.
(ii) Investing Activities
Investing activities is usually the second part of a cash flow statement.
This includes the purchases or sales of long-term assets, such as property,
equipment, and even stocks. These actions are still represented as " cash in"
or " cash out" depending on what is purchased & sold.
(iii) Financing Activities
This is the third part of the cash flow statement. And, as the name
might suggest, the financing activities section tracks financing activities. For
large companies this includes money raised by issuing stock in the company,
or borrowing many from banks. Paying back these loans are also considered
under this section of the cash flow statement.
IMPORTANCE OF CASH FLOW STATEMENT:
1. Many business owners disregard the importance of cash flow statements
because they unwittingly believe that their current financial standing can be
construed from other financial reports and projections. Unfortunately,
however, a cash flow statement is necessary to adequately assess the
incoming and outgoing flow of cash and other resources in a business.
2. Not only will a business owner with a cash flow system be more aware of his
or her financial standing, but it will also help investors to make educated
decisions on future investments. A business with regular and reliable cash
flow statements shows more economic solvency, and is more attractive to
investors.
3. A cash flow statement documents the incoming and outgoing cash in plain
terms. Future sales and sales made for credit (unless they have been paid off)
are not included in the cash flow statement, and most of the data will come
from core operations. Payables and receivables should be expressly defined,

as should depreciation of product value and inventory that has not yet been
moved.
4. This will allow a business owner to compare past periods with the current
financial standing and determine whether your receivables have increased or
decreased.
5. This can also help to track your investments next to your receivables and
payables. Are your investments increasing or decreasing in value? And has
your inventory moved at a steady pace? New or expanding businesses can
expect to see a decrease in cash flow, but this doesn't mean that the business
is going under. More stables businesses should see a steadily increase in
cash flow over a period of several months or years.
6. The Statement of Cash Flows is the final document prepared in the Financial
Report set, and provides information that is a direct flow of information from
the Income Statement, Owner Equity Statement and Balance Sheet;
therefore, this report adds validity and accountability to the Financial
Statements.

ADVANTAGES OF CASH FLOW STATEMENT:


1. It helps the newly formed companies to know their inflow and outflow of
cash.
2. It helps the investors to judge whether the company is financially sound or
not.
3. It helps the company to know whether it will be able to cover the payroll and
other

expenses.

4. It helps the lenders to know the companys ability to repay.


5. A cash flow statement is provided on monthly basis or quarterly basis or six
monthly basis or yearly basis.
6. These statements help to have an accurate analysis of the firms ability to
meet its current liabilities.
7. A cash flow statement is helpful for planning and managing future financial
commitments.
8. A cash flow statement summarizes the companys cash receipts and cash
payments over a period of time.

9. It is useful for determining the short term ability of the concern to meet its
liabilities

as

it

does

&

not

include

non

cash

items.

10. A cash flow statement gives vital information not only about the
companys performance but also about its major activities during the year.

DISADVANTAGES OF CASH FLOW STATEMENT:


1. By itself, it cannot provide a complete analysis of the financial position of
the firm.
2. It can be interpreted only when it is in confirmation with other financial
statements and other analytical tools like ratio analysis.

4.4 OBJECTIVES OF THE CASH FLOW STATMENT


Cash flow statement aims at highlighting the cash generated from operating
activities.
Cash flow statement helps in planning the repayment of loan schedule and
replacement of fixed assets, etc.
Cash is the centre of all financial decisions. It is used as the basis for the
projection of future investing and financing plans of the enterprise.
Cash flow statement helps to ascertain the liquid position of the firm in a
better manner. Banks and financial institutions mostly prefer cash flow
statement to analyse liquidity of the borrowing firm.
Cash flow Statement helps in efficient and effective management of cash.
The management generally looks into cash flow statements to understand
the internally generated cash which is best utilised for payment of
dividends.Cash Flow Statement based on AS-3 (revised) presents separately
cash generated and used in operating, investing and financing activities.
It is very useful in the evaluation of cash position of a firm.
The cash flow statement identifies the sources of cash inflows, the items
on which cash was expended during the reporting period, and the cash
balance as at the reporting date.
Cash flow information allows users to ascertain how a public sector entity
raised the cash it required to fund its activities and the manner in which that
cash was used.
In making and evaluating decisions about the allocation of resources, such
as the sustainability of the entitys activities, users require an understanding of
the timing and certainty of cash flows.
The objective of this standard is to require the provision of information
about the historical changes in cash and cash equivalents of an entity by

means of a cash flow statement whichclassifies cash flows during the period
from operating, investing and financing activities.

4.5 FORMATE OF CASH FLOW STATMENT


Table No.3
Indirect method
Format for Cash flow Statement for the year ended...............
As per Accounting Standard-3 (Revised)
PARTICULARS

AMOUNT

(i) Cash flows from operating Activities


Net Profit as per Profit and Loss A/c

xxx

Add : Transfer to reserve

xxx

Proposed dividend for current year

xxx

Interim dividend paid during the year

xxx

Provision for tax made during the current year

xxx

Extraordinary items, if any, debited to Profit and Loss A/c

xxx

Less : Extraordinary Items, if any, credited to Profit

xxx

and Loss A/c


Refund of Tax credited to Profit and Loss A/c

xxx

A. Net profit before taxation and Extra ordinary items


Adjustment for Non-Cash and Non-Operating Items
B. Add :
Depreciation

xxx

Preliminary expenses

xxx

Discount on issue of shares and debentures written off

xxx

Interest on borrowings and debentures

xxx

Loss on sale of fixed assets

xxx

C. Less :
Interest income/received

xxx

Dividend income received

xxx

Rental income received

xxx

Profit on sale of fixed asset

xxx

D. Operating profits before working capital changes(A + B - C)

xxxx

E. Decrease in current assets and increase in current liabilities

xxx

F. Less : Increase in current assets and decrease in current


liabilities
G. Cash generated from operations (D + E F)

xxx
xxx

H. Less : Income tax paid (Net tax refund received)

xxx

I. Cash flow from before extraordinary items

xxx

Adjusted extraordinary items (+/)

xxx

J. Net cash from operating activities

xxxx

(ii) Cash from investing accounting


Add :
Proceeds from sale of fixed assets

xxx

Proceeds from sale of investments

xxx

Proceeds from sale of intangible assets

xxx

Interest and dividend received

xxx

Less :
Rent income

xxx

Purchase of fixed assets

xxx

Purchase of investment

xxx

Purchase of intangible assets like goodwill

xxx

Advanced extraordinary items (+/)

xxx

Net cash from (or used in) investing activities

xxx

(iii) Cash flows from financing activities


Add :
Proceeds from issue of shares and debentures

xxx

Proceeds from other long term borrowings

xxx

Less :
Final dividend fund

xxx

Interim dividend fund

xxx

Interest on debentures and loans paid

xxx

Repayment of loans

xxx

Redemption of debenture preference shares

xxx

Adjust extraordinary items (+/)


equivalent (i + ii + iii)
(v) Add : cash and cash equivalents in the beginning of the

xxx

year
cash in hand

xxx

cash at bank overdraft

xxx

short term deposit

xxx

marketable securities

xxx

(vi) Less : cash and cash equivalents in the end of the


year
cash in hand

xxx

cash at Bank (by bank overdraft)

xxx

short term deposits

xxx

Cash flow from operation

xxx

Table No.4
Direct method
Format for Cash flow Statement for the year ended...............
As per Accounting Standard-3 (Revised)
PARTICULARS

AMOUNT

(i) Cash flow from operating activities

xxx

A. Operating cash receipts

xxx

Cash sales

xxx

Cash received from customers

xxx

Trading commission received

xxx

Royalties received

xxx

B. Less : Operating cash payment

xxx

Cash purchase

xxx

Cash paid to the supplier

xxx

Cash paid for business expenses like office expenses,


Manufacturing expenses,
selling and distribution expenses

xxx

C. Cash generated from operation ( A B)

xxx

D. Less Income tax paid (Net of tax refund received)

xxx

E. Cash flow before extraordinary items

xxx

F. Adjusted extraordinary items (+/)/Receipt/payment

xxx

G. Net cash flow from (or used in) operating activities

xxx

(ii) Cash flow from investing activities


(calculation same as under indirect method)
(iii) Cash flow from financing activities
(Calculation same as under indirect method)
(iv) Net increase/decrease in cash and cash equivalents (i + ii +
iii)
v) Add cash and cash equivalent in the beginning of the year
(same as under indirect method)
(vi) Less cash under cash equivalent in the end of the year

xxx

Cash Flow from Operation

xxx

xxx
xxx
xxx
xxx

5. DATA ANALYSIS & INTERPRETATION


CASH FLOW STATEMENT OF GACL
Table No.5
[Rs. in Lakhs]
PARTICULARS
A. CASH FLOW FROM OPERATING

2009-10

2008-09

28,601.32

33,789.78

ACTIVITIES
B. CASH FLOW FROM INVESTING ACTIVITIES

(25,910.27) (33,703.35)

C. CASH FLOW FROM FINANCING ACTIVITIES

(4,077.09)

(2,887.07)

2,646.92

5,447.56

1,260.88

2,646.92

(1,386.04)

(2,800.64)

14,627.90

26,130.40

12,178.70

10,946.94

Interest received

(356.39)

(173.74)

Dividend received

(688.92)

(678.88)

Interest charged to profit & loss account

1,747.60

2,459.40

(0.45)

D. CASH AND CASH EQUIVALENTS AT THE


BEGINNING OF THE YEAR
E. CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR
F. TOTAL CASH FLOW DURING THE YEAR
(A+B+C) or (E-D)
A. CASH FLOW FROM OPERATING
ACTIVITIES:
NET PROFIT / (LOSS) BEFORE TAX AND
EXTRAORDINARY ITEMS
Adjustments for :
Addition / (deduction)
Depreciation
(Includes Prior Period ` 23.43 Lakhs, Previous
Year `3.63 Lakhs)

Profit on sale of assets

Loss on sale of assets

16.27

23.16

470.62

985.90

964.64

96.88

96.88

936.23

(447.46)

736.93

301.66

Sub total

14,269.51

15,346.46

OPERATING PROFIT BEFORE WORKING

28,897.41

41,476.86

(2,254.04)

(6,435.89)

3,032.41

(6,585.06)

Trade payables

1,549.36

8,199.15

CASH GENERATED FROM OPERATIONS

31,225.14

36,655.06

Direct taxes paid

(2,623.82)

(2,865.28)

CASH FLOW BEFORE EXTRAORDINARY

28,601.32

33,789.78

28,601.32

33,789.78

Loss on impairment of assets


Other capital expenditure (recoating &
remembraning)
Contribution of power, water & services written off
Loss on derivative transactions
Excess provision written back on derivative
transactions
Diminution in value of investment

CAPITAL CHANGES
DECREASE OR (INCREASE) IN ASSETS :
Trade and other receivables
Inventories
INCREASE / (DECREASE) IN LIABILITIES :

BEFORE TAX

ITEMS
Extraordinary items
NET CASH FLOW FROM OPERATING
ACTIVITIES:(TOTAL - A)
B. CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of fixed assets
Sale or adjustment of fixed assets

(23,648.62) (33,873.01)
22.33

14.03

(3,059.99)

(96.42)

118.10

Interest received

356.39

173.74

Dividend received

688.92

678.88

(269.30)

(718.67)

Purchase of investments
Proceeds from sale of investments

Other capital expenditure (recoating &

remembraning)
NET CASH FLOW FROM INVESTMENT

(25,910.27) (33,703.35)

ACTIVITIES :(TOTAL - B)
C. CASH FLOW FROM FINANCING
ACTIVITIES:
Interest paid

(2,062.43)

(2,205.94)

Dividend paid

(2,577.53)

(3,007.11)

Long term borrowings

(12.93)

10,731.07

Short term borrowings

575.80

(8,405.09)

(4,077.09)

(2,887.07)

2,186.57

3,954.57

460.35

1492.99

2,646.92

5,447.56

Cash and cheques on hand

940.62

2,186.57

Balances with banks

320.26

460.35

1,260.88

2,646.92

(1,386.04)

(2,800.64)

NET CASH FLOW FROM FINANCING


ACTIVITIES: (TOTAL - C)
D. CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR :
Cash and cheques on hand
Balances with banks
NET CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR: (TOTAL - D)
E. CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR :

NET CASH AND CASH EQUIVALENTS AT THE


END
OF THE YEAR: (TOTAL - E)
F. TOTAL CASH FLOW DURING THE YEAR
(A+B+C) OR (E - D)

5.1 ANALYSIS OF CASH FLOW STATMENT OF GACL


1. Cash Flow from Operating Activities has been decresed from Rs.
33,703.35 lacs of 2008-09 to Rs. 25,910.27 lacs in 2009-10.

Purchase of the asset is lesser than previous year, i.e. 23,648.62 lacs in
comparison of previous years 33,873.01.But because of cash outflow;
cash flow from investing activities is lesser.

Purchase of investment is increased much higher than previous year, i.e.


From 96.42 lacs of 2008-09 to 3,059.99 lacs in2009-10.Thus, cash outflow
is increased much more in comparison of previous year.

There is no proceeds occur from sale of investment.

Interest received & dividend received has been increased in compare to


previous year, i.e. From 173.74 lacs to 356.39 lacs and 678.88 lacs to
688.92 lacs. It shows that cash inflow has increased, but less than cash
outflow.

Other capital expenditure has been decreased from 718.67 lacs to 269.30
lacs. So cash outflow is decreased. But, here, it is not higher in
comparision to increased cash outflow.

2. Cash Flow from Investing Activities has been decreased from Rs.
33,703.35 lacs of 2008-09 to Rs. 25,910.27 lacs of 2009-10.It is in
negative form.This shows cash outflow. So, it can be said that cash
outflow has been decreased in 2009-10.The reasons are:

Purchase of the asset is lesser than previous year, i.e. Rs. 23,648.62 lacs
in comparison of previous years Rs. 33,873.01lacs. So, cash outflow has
been decreased and cash flow from investing activities is lesser.

There is no proceeds occur from sale of investment.

Interest received & dividend received has been increased in compare to


previous year, i.e. from Rs. 173.74 lacs to Rs. 356.39 lacs and Rs. 678.88
lacs to Rs. 688.92 lacs, respectively. It shows that cash inflow has been
increased. Due to this, cash outflow has been settled down.

Other capital expenditure has been decreased from Rs. 718.67 lacs to Rs.
269.30 lacs. So cash outflow is decreased.

Purchase of investment is increased much higher than previous year, i.e.


from Rs. 96.42 lacs in 2008-09 to Rs. 3,059.99 lacs in 2009-10, so, cash

outflow is increased much more in comparison of previous year.


Eventhough overall cash outflow of 2009-10 has been decreased. It is
happened because of increase in cash inflow & decrease in cash outflow
during the year. Increase in cash inflow & decrease in cash outflow is
higher than cash outflow due to purchase of Investment.
3. Cash Flow rom Financing Activities has been increased from Rs.
2,887.07 lacs in 2008-09 to Rs. 4,077.09 lacs in 2009-10.The reasons are:

Interest paid has been decreased from Rs. 2,205.94 lacs in 2008-09 to Rs.
2,062.43 lacs.So, cash outflow has been decreased.

Dividend paid has been decreased to Rs. 2,577.53 lacs in 2009-10 from
Rs. 3,007.11 lacs in 2008-09. Here, also, cash outflow has been
decreased.

Long term borrowings have been decreased from Rs. 10731.07 lacs in
2008-09 to Rs. 12.93 lacs in 2009-10.

Short term borrowings have, also, been decreased to Rs. 575.80 lacs in
2009-10 from Rs. 8405.09 lacs in 2008-09. Thus, in all financing activities,
cash outflow has been decreased. So, cash flow from financiaing activities
is increased as compared to previous year.

4. Cash and Bank balance at the beginning of the year 2009-10 has been
decreased to Rs. 2,186.57 lacs & Rs. 460.35 lacs, respectively, in 2009-10
from Rs. 3,954.57 lacs & Rs. 1492.99 lacs, respectively, in 2008-09.Thus,
net cash equivalents at the beginning of the year have been decreased by
Rs.2982.64 lacs.
5. Cash and Bank balance at the end of the year 2009-10 has, also, been
decreased to Rs. 940.62 lacs & Rs. 320.26 lacs, respectively, in 2009-10
from Rs. 2,186.57 lacs & Rs. 460.35 lacs, respectively, in 2008-09. Thus,
net cash equivalents at the end of the year have been decreased by
Rs.1386.04 lacs.
Thus, because these activities, overall cash flow for the year 2009-10 has
been decreased to Rs.1414.6 lacs.

5.2 Cash Flow Indicator Ratio


1. Cash Flow Margin Ratio:
The Cash Flow Margin ratio is an important ratio as it expresses the
relationship between cash generated from operations and sales. The
company needs cash to pay dividends, suppliers, service debt, and invest in
new capital assets, so cash is just as important as profit to a business
firm.The Cash Flow Margin ratio measures the ability of a firm to translate
sales into cash.The numerator of the equation comes from the firm's
Statement of Cash Flows. The denominator comes from the Income
Statement. The larger the percentage, the better for the firm.
Formula:
Cash Flow Margin Ratio= Operating Cash Flow
Net Revenue

Cash Flow Margin ratio


Table No.6
YEAR

2005-06

2006-07

2007-08

2008-09

2009-10

Operating Cash
Flow (Rs. In
lacs)
Net Revenue
(Rs. In lacs)

33,580.50

27,563.15

35,203.78

33,789.78

28,601.32

1,09,395.71

1,21,510.69

1,32,238.59

1,56,412.58

1,38,444.30

30.70

22.68

26.62

21.60

20.66

Operating Cash
Flow to Sales
Ratio(In
Percentage)

Cash Flow Margin ratio


Graph No.1

35
R 30
A
25
T
I 20
O 15

RATIO

10
I
n 5
% 0

2005-06

2006-07

2007-08

2008-09

2009-10

YEAR

Interpretation:
GACL has net cash provided by operating activities is Rs. 28,601.32
lacs and net sales is Rs. 1,38,444.30 lacs. An operating cash flow to sales
ratio of 2009-10 is 20.66%, or approximately 21 percents of operating cash
flow in every sales rupee.It shows that company can able to gain 20.66%
cash from sales.The ratio is less in previous year, i.e. 21.60%.From the
comparision of five years, it can be seen that in the year, 2005-06, ratio is
highest, i.e. 30.70%.It can ,also, be seen that sales has been grown since last
four years, from 2005-06 to 2008-09.But it has decreased in previous year.So,
in that year, companies ability to convert sales into cash is decreased.

2. Free Cash Flow to Operating Cash Flow:


The free cash flow to operating cash flow ratio measures the relationship
between free cash flow and operating cash flow. Free cash flow is most often
defined as operating cash flow minus capital expenditures, which, in analytical
terms, are considered to be an essential outflow of funds to maintain a
company's competitiveness and efficiency. The cash flow remaining after this
deduction is considered "free" cash flow, which becomes available to a
company to use for expansion, acquisitions, and/or financial stability to face
difficult market conditions.
Formula:
FCF/OCF Ratio= Free Cash Flow(Operating Cash Flow-Capital Expenditure)
Operating Cash Flow

Free Cash Flow to Operating Cash Flow Ratio


Table No.7
YEAR

2005-06

2006-07

2007-08

2008-09

2009-10

Free Cash
Flow (Rs. In
lacs)
Operating
Cash Flow
(Rs. In lacs)
Free Cash
Flow to
Operating
Cash Flow
Ratio (In
Percentage)

32493.4

26655.15

34392.66

29386.94

25011.96

33,580.50

27,563.15

35,203.78

33,789.78

28,601.32

96.76

96.71

97.70

86.97

87.45

Free Cash Flow to Operating Cash Flow Ratio


Graph No.2
100
98
96
R
A
T
I
O
(
I
n
%

94
92
90
88

RATIO

86
84
82

80
2005-06

2006-07

2007-08

2008-09

2009-10

YEAR

Interpretation:
This ratio shows financial strength of the company. The higher the percentage
of free cash flow embedded in a company's operating cash flow, the greater
the financial strength of the company.
In all the five years ratio is high.It shows that GACL is financially stable
company.It has above 90% ratio in three years,starting from 2005 to 2007.In
2008 & 2009 company has lesser ratio as compared to last three years.But it
is not so less.The reason for lesser ratio in these two years is that GACL has
incurred more capital expenditure in these years.But it can be said that GACL
has achieved strong financial condition.

3. Cash Flow Coverage Ratio:


This ratio measures the ability of the company's operating cash flow to meet
its obligations - including its liabilities.The operating cash flow is simply the
amount of cash generated by the company from its main operations, which
are used to keep the business funded.The larger the operating cash flow
coverage for these items, the greater the company's ability to meet its
obligations, along with giving the company more cash flow to expand its
business, withstand hard times, and not be burdened by debt servicing and
the restrictions typically included in credit agreements.
i. Short term Debt Coverage Ratio:
It indicates a companies ability to repay its short term debt.
Formula:
Short term Debt Coverage Ratio= Operating Cash Flow
Short term Debt

Short term Debt Coverage Ratio


Table No.8
YEAR

2005-06

2006-07

2007-08

2008-09

2009-10

Operating
Cash Flow
(Rs. In lacs)
Short term
Debt
(Rs. In lacs)
Short term
Debt
Coverage
Ratio (In
Times)

33,580.50

27,563.15

35,203.78

33,789.78

28,601.32

10000.00

17500.00

15000.00

8050.00

8500.00

3.36

1.58

2.34

4.20

3.36

Short term Debt Coverage Ratio


Graph No.3
4.5
4
3.5

R
A
T
I
O

3
2.5
2
RATIO

T
i
m
e
I s
n

1.5

1
0.5
0
2005-06

2006-07

2007-08

2008-09

2009-10

YEAR

Interpretation:In previous year GACL has Ratio of 3.36 times.It


indicates that company has 3.36 Rs.cash to repay its short - term debt
of Re.1.This is good sign for company.But it can be shown that this
Ratio is less as compared to 2008-09. Short term Debt Coverage
Ratio shows more fluctuation in five years,as it is 3.36 times in 2005-06
& than falls to 1.6 times in 2006-07. It again rises to 2.34 times in200708.In 2008-09 it is at highest level, i.e.4.20 times & then again falls to
3.36 times.

ii. Capital Expenditure Coverage Ratio:


This Ratio indicates how much company is incurring Capital
Expenditure against available operating cash.This Ratio is in times.
Formula:
Capital Expenditure Coverage Ratio= Operating Cash Flow
Capital Expenditure

Capital Expenditure Coverage Ratio


Table No.9
YEAR

2005-06

2006-07

2007-08

2008-09

2009-10

Operating
Cash Flow
(Rs. In lacs)
Capital
Expenditure
(Rs. In lacs)
Capital
Expenditure
Coverage
Ratio (In
Times)

33,580.50

27,563.15

35,203.78

33,789.78

28,601.32

960.09

908.00

811.12

4402.84

3589.36

34.98

30.36

43.40

7.67

7.97

Capital Expenditure Coverage Ratio


Graph No. 4

R
A
T
I
O
(
I
n
T
i
m
e
s

50
45
40
35
30
25
RATIO

20
15
10
5

0
2005-06

2006-07

2007-08

2008-09

2009-10

YEAR

Interpretation:
In years from 2005 to 2007 capital expenditure is very low.Due to this,
Ratio is much smaller than next two years.In 2009-10, GACL has
incurred one rupee of capital expenditure against 7.97 Rs.of operating
cash.so, it can be said that company has incurred lesser amount of
capital expenditure in the year 2007-08 as compared to above five
years.
Thus, higher the Ratio, the lesser amount of capital expenditure is
incurred during that year.

iii. Dividend Payout Ratio:


This ratio identifies the percentage of earnings (net income) per
common share allocated to paying cash dividends to shareholders.
The dividend payout ratio is an indicator of how well earnings support
the dividend payment.The payment of a cash dividend is recorded in
the statement of cash flows under the "financing activities" section.
Formula:
Dividend Payout Ratio= Dividend per Share
Earning Per Share

Dividend Payout Ratio


Table No.10
YEAR

2005-06

2006-07

2007-08

2008-09

2009-10

Dividend Per
Share (In Rs.)

2.00

2.50

3.50

3.00

3.00

Earning Per
Share
(In Rs.)
Dividend
Coverage
Ratio
(In
Percentage)

26.96

25.00

30.00

26.00

23.00

10

11.67

11.54

13.04

Dividend Payout Ratio


Graph No.5
14
R
A
T
I
O
(
I
n
%

12
10
8
6

RATIO

2
0
2005-06

2006-07

2007-08

2008-09

2009-10

YEAR

Interpretation:
This ratio indicates that how well earnings support the dividend
payment.In GACL this ratio is constantly increasing during the period of
2005 to 2009.In 2005-06 it is only 7%,while in 2009-10 it is 13%.During
the year 2007 & 2008, the ratio is approximetaly same. There was an
increase in both, dividend per share & EPS in 2007 but in 2008,both
has decreased.
At last, it can be said that the earnings of GACL supports to pay
dividend to its shareholders.

4. Operating Cash Flow Ratio:


It is a measure of how well current liabilities are covered by the cash flow
generated from a company's operations. The operating cash flow ratio can
gauge a company's liquidity in the short term. Using cash flow as opposed to
income is sometimes a better indication of liquidity simply because, as we
know, cash is how bills are normally paid off.

Formula:
Operating Cash Flow Ratio= Cash Flow from Operation
Current Liabilities

Operating Cash Flow Ratio


Table No.11
YEAR

2005-06

2006-07

2007-08

2008-09

2009-10

Cash Flow
from
Operation
(Rs. in lacs)
Current
Liabilities
(Rs. in lacs)
Operating
Cash Flow
Ratio
(In Times)

33,580.50

27,563.15

35,203.78

33,789.78

28,601.32

23,677.87

31,135.27

41,440.03

53,322.03

50,064.90

1.42

0.88

0.85

0.64

0.57

Operating Cash Flow Ratio


Graph No.6
1.6
1.4
R
A
T
I
O

1.2

T
i
m
e
I s
n

1
0.8
0.6

RATIO

0.4
0.2
0
2005-06

2006-07

2007-08

2008-09

2009-10

YEAR

Interpretation:
In previous year,current liabilities are more & cash flow was less,so,ratio is
lowest as compared to other years.In 2005-06, company had 1.42 times cash
to cover its current liabilities.Such ratio is good for company.But then ratio
has decreased,till previous year.so,it can be said that, as compared to
previous years, liquidity of the company has decreased.

7. RESULTS & FINDINGS

It can be seen that since last two years short term debt of GACL has
decreased. So, it is good for the company to repay such loans from
available funds.

Dividend Payout Ratio has, also, increased in last five years.

Earnings of Gacl support well to pay dividend to the shareholders.

GACL should reduce its capital Expenditure. So that, it can become more
strong in terms of financial strength.

GACL should increase its operating cash flow, because operating cash
flow is less as compared to previous four years.It can affect financial
strength & liquidity position of the firm.

8. LIMITATION OF THE CASH FLOW STATMENT

Cash is one of the major lubricants of business activity, but there are
certain things that cash flow doesn't shed light on. For example, it doesn't
tell us the profit earned or lost during a particular period: profitability is
composed also of things that are not cash based.

This is true even for numbers on the cash flow statement like "cash
increase from sales minus expenses", which may sound like they are
indication of profit but are not.

As it doesn't tell the whole profitability story, cash flow doesn't do a very
good job of indicating the overall financial well-being of the company.

The statement of cash flow indicates what the company is doing with its
cash and where cash is being generated, but these do not reflect the
company's entire financial condition.

The cash flow statement does not account for liabilities and assets, which
are recorded on the balance sheet.

Furthermore accounts receivable and accounts payable, each of which


can be very large for a company, are also not reflected in the cash flow
statement.

In other words, the cash flow statement is a compressed version of the


company's checkbook that includes a few other items that affect cash, like
the financing section, which shows how much the company spent or
collected from the repurchase or sale of stock, the amount of issuance or
retirement of debt and the amount the company paid out in dividends.

9. CONCLUSION/SUGGESTION

GACL is the cashcow for government of Gujarat.

It is the single caustic soda producer in the country with the market share
of 13.75%.

It is a leader in the chore-Alkalie Industry.

It can get raw material at the lowest cost, as Gujarat is having 1600km of
sea shore.

It has the captive power plant at dahej.

The Company enjoys low cost powder which is also considered as raw
material.

Research & Development department of GACL comes out with new


products like poly Aluminums Chloride with even more law cost.

It has won many awards on quality control and environmental


protection.The company has shown its commitment towards becoming a
green company.

The Company is having problems with dumping activity of Chinese


companies for last many years. But the Indian govt has granted all its
recommendation and took Anti-dumping measurements against these
Chinese companies.

Company has recently adopted performance based pay which will make it
more efficient in coming period.

ANNEXTURE:
1. Balance Sheet as on 31.3.2010:
PARTICULARS

(Rs. In Lacs)

SCHEDULE

RS.

31.03.2010
RS.

31.03.2009
RS.

Shareholders Funds:
Share Capital

7,343.84

7,343.84

Reserves and Surplus

1,31,764.11
1,39,107.95

1,17,148.75
1,24,492.59

32,323.81
31,757.03
2,03,188.79

25,784.15
8,088.79
33,872.94
27,908.89
1,86,274.42

1,51,799.13
9,097.35

2,58,073.16
1,14,067.96
1,44,005.20
8,385.44

1,60,896.48
14,050.58

1,52,390.64
11,727.52

SOURCES OF
FUNDS:

Loan Funds :
Secured Loans
Unsecured Loans

3
4

23,797.95
8,525.86

Deferred Tax (Net)


Total
APPLICATION OF
FUNDS :
Fixed Assets :
Gross Block
Less : Depreciation
Net Block
Capital Work-inProgress
Investments
Current Assets,
Loans and Advances:
Inventories
Sundry Debtors
Cash and Bank
Balances
Loans and Advances
Less : Current
Liabilities and
Provisions
Miscellaneous
Expenditure
Total :

2,78,899.07
1,27,099.94

7
8
9

14,024.88
26,355.19
1,260.88

17,057.29
24,810.49
2,646.92

10

36,665.68
78,306.63
50,064.90

30,963.59
75,478.29
53,322.03

11

28,241.73
---

22,156.26
---

2,03,188.79

1,86,274.42

2. Schedule of Balance Sheet used in Analysis of Cash Flow


Statement:
Schedule-4
Unsecured Loans
1.Short term Loans
Banks
Others (Net of prepayment advances)
2.Sales Tax Deferment
Loans
Total

(Rs. In Lacs)
31.03.2010
Rs.

31.03.2009
Rs.

8,500.00
----

5,000.00
3050.00

25.86

38.79

8,525.86

8,088.79

3. Profit & Loss Statement for the year ended on 31.3.2010:


(Rs. In Lacs)
PARTICULARS
SCHERS.
31.03.2010 31.03.2009
DULE
RS.
RS.
INCOME :
Sales (Including Excise Duty)
Less : Excise Duty

12

Other Income

13

Increase/(Decrease) in Stock of
Finished Goods & Prcoess
Stock
EXPENDITURE :
Raw Materials Consumed
Manufacturing and Operating
Expenses
Difference of Excise Duty on

1,38,444.30
10,636.37
1,27,807.93
6,183.56

14

15
16

1,33,991.49
(620.12)

1,56,412.58
17,730.47
1,38,682.11
4,325.27
1,43,007.38
1,802.12

1,33,371.37

1,44,809.50

57,790.78
29,328.69

52,202.62
36,582.27

7.70

106.7

11,990.79

9,059.51

Opening and Closing Stock


Employees Remuneration and

17

Benefits
Administration, General and
Marketing Expenses
Interest
Depreciation
Profit
Prior Period Adjustments (Net)
Debit / (Credit)
Profit before Taxation
Provision for Taxation
Provision for Taxation
Deferred Income Tax (Net)
Wealth Tax
Fringe Benefits Tax
MAT Credit Entitlement
Excess Provision for Income
Tax of earlier years written back
Profit after Taxation
Surplus Balance Brought
forward from Previous Year
Amount Available for
Appropriations
APPROPRIATIONS :
Proposed Final Dividend
Tax on Proposed Dividend
Transferred to General Reserve
Balance Carried to Balance
Sheet

18

5,234.01

7,137.21

19

1,747.60
12,155.27

2,459.4
10,943.31
1,18,491.04
26,318.46

1,18,254.84
15,116.53
488.63
14,627.90

188.06
26,130.40
2,883.53
3,980.39
0.95
38.26

(2,556.48)
17,184.38

6,903.13
19,227.27

29,101.99

22,066.25

46,286.37

41,293.52

2,203.11
365.91
8,593.00
35,124.35

2,203.11
374.42
9,614.00
29,101.99

46,286.37

41,293.52

2,368.93
3,848.14
1.07
--(2,368.93)
(6,405.69)

REFERENCE
1. http://www.careersearch@careratings.com dated on 11/06/2011
2. www.wikipedia.org dated on 16/06/2011
3. www.ibef.org dated on 26/06/2011
4. www.edelweiss.com dated on 15/06/2011
5. www.final-yearprojects.co.cc dated 1/06/2011
6. CRISIL, I-Sec Research dated on 10/06/2011
7. Economic Survey 2009-10, DIPP dated on 16/06/2011
8. http://eaindustry.nic.in dated on 17/06/2011
9. http://www.moneycontrol.com/stocks/company_info//25/6/2011