A Study On Funds Flow Analysis of Vital Pvt. LTD., Tada
A Study On Funds Flow Analysis of Vital Pvt. LTD., Tada
A Study On Funds Flow Analysis of Vital Pvt. LTD., Tada
Volume 6 Issue 6, September-October 2022 Available Online: www.ijtsrd.com e-ISSN: 2456 – 6470
INTRODUCTION
Finance is the lifeblood of every business activity reasons the basic causes of changes in net working
without which the wheels of modern business capital. This statement is also termed as “Statement of
organization system cannot be greased. Finance changes in the financial position on working capital
management is managerial activity, which is basis”.
concerned with planning and controlling of the firm's
Funds flow statement is an important tool and is
financial Resources. Finance is a scarce resource and
widely used in the hands of financial analysts and
it has to be managed efficiency for the successful
managers for analyzing the financial management of
functioning of any company. Several companies have
a company. Funds keep on moving in a business,
come to grief mainly because of inefficient
which itself based on going concern concept. In a
management of finance, in spite of other favourable
narrow sense, it means inflow and out flow of cash
conditions.
only and a flow statement prepared on this basis is
The funds flow statement is a statement which shows called as "cash flow statement".
the movement of funds and is a report of financial
Definition:
operations of the business undertaking. It indicates
"A statement of sources and Application of Funds is a
various means by which funds were obtained during a
technical device designed to analyze the changes in
particular period and the ways in which these funds
the financial condition of a business enterprise
were employed. In simple words it is a statement of
between two dates".
sources and applications of funds.
----R. A. Foulk
The funds flow is designed to analyze the changers in
the financial condition of a company between two Uses-of Funds Flow Analysis:
periods. This statement will highlights the sources It helps in the analysis of financial operations.
from which funds are received and the uses to which It throws light on many perplexing questions of
these have been put and it enables to know with general interest.
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It helps in the formation of a realistic dividend policy. It is not an original statement but simply a re -
arrangement of data given in the financial
It helps in the proper allocation of resources.
statements.
It acts as a future guide.
Need for the study:
Advantages of the Funds Flow Statement: The sources of funds for a business could be from
It provides information about how funds are both the long term and short term. Any business to
obtained and how they are put to actual use. survive and growth in the competitive market, funds
It registers changes in the flow of funds during a are needed not only to meet its long-term financial
given period of time. needs but also short-term requirements. The long-
Term sources comprising of share capital, long term
It is supplementary to the conventional financial debt inclusive of debentures etc., while the short term
statements. sources comprises of the short term loans, working
It indicates how funds are generated from the capital collection from commercial banks, loans from
different financial resources of a corporation and the call money market and among these fall the sales
how the reservoir of its assets is created. In other which has two phases the cash sales and the credit
words, it depicts changes in the financial structure sales.
of the corporation. The help of funds flow statements to evaluate the
It is an important tool in the hands of the financial pattern of the firm.
manager in the process of decision making. The funds flow reveals clearly the causes for the
It determines the financial consequences of financial difficulties of the company.
business operations. It explains why in spite of With the help of the funds flow statements we can
making profits a corporation is illiquid position. estimate the cash balance of the company.
Indicates how funds are generated from the Objectives of the study:
different financial resources of a corporation and To study the working capital position of the company
how the reservoir of its assets is created. In other Vital Paper Pvt Ltd
words it depicts changes in the financial structure To examine the financial position of the company.
of the corporation.
To identify the sources and application of funds in
It is an important tool in the hands of the financial the organization.
manger in the process of decision making.
To study the working capital position of the
It determines the financial consequences of company.
business operations. It explains why in spite of
making profits a corporation is illiquid position. To examine the reasons for changes in the
liabilities, assets or equity capital in the study
It enables the financial manager to obtain answers area.
to a number of questions regarding the amount of
loan requirements the purposes for which it may Scope of the study:
be required the terms of repayment the source of This study refers to only individual enterprise i.e.,
repayment etc. Vital Paper Pvt Ltd. In fact, an examination of all
components of Current Assets will enable to Asses
It may enable the financial manger to allocate the efficiency of working capital management as all
resources to productive investments. It is closely these components are interrelated.
related to the normal business decision making
process accounting statements balance sheets and This study is on Funds Flow position in the company.
income statements and is related to a time span. It is based on two statements namely (1) Schedule of
changes in Working capital and (2) Funds Flow
It any enable the management to take decisions on statement.
planning a dividend policy on challenge out a
programmed of the financial re-organization. The scope of the study is to find out how assets and
liabilities are maintained. it is through the Balance
Limitations of funds Flow Analysis: sheet of the company, for the periods, years 2017-
It is essentially historic in nature and projected 2018, 2018-2019, 2019-2020, 2020-2021 and 2021-
funds flow statement cannot be prepared with 22.
much accuracy.
It has proposed to study the sources & Application of
It cannot be reveal continues changes. funds in Vital Paper Pvt Ltd, for 5 years i.e., from the
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financial years 2017-2018, 2018-2019, 2019-2020, interview method with the official of the organization.
2020-2021 and 2021-22. The data thus collected is about the history and
accounting policies of the organization and financial
Research methodology:
The methodology employed for doing the present statements like profit & loss account and balance
study is that the information is collected from primary sheet.
and secondary sources. The information was used to Secondary Data:
calculate the funds flows on the basis of these The data which is collected from the published
analysis interpretations were made. sources of journals, magazines, annual report books,
are called secondary data
DATA SOURCES
There are two types of sources are there for data Limitations of the study:
collection. They are 1. The study based on the data given by the officials
Primary data and reports of the company, the confidentially of
Secondary data some facts and figures are also one limitation.
Sources of data collection. 2. This study is based on past only 5 years financial
information.
Primary data:
Primary data is the data which are collected originally 3. The project duration limited period that is two
are at first time the researcher. It does not exist months only.
already in records and publications. The primary data
4. The study is based on the facts and figures
useful to gather the present working conditions of the
provided by the company and obtained from the
employees. T is collected by the technique of
company annual reports.
Data Analysis:
FUNDS FLOW ANALYSISFOR THE YEAR ENDED 2021-2022
Sources Rs. lakhs Applications Rs. Lakhs
Unsecured Loans 5480.37 Purchase of Fixed Asset 5014.03
Capital Work in Progress 411.07 Income tax paid 424.17
Sale of investment 589.83 Increase in Working Capital 1304.24
Funds from operation 1903.36 Secured loans paid 1641.54
Total 8384.63 8384.63
Interpretation:
From observing the above table we can see that working capital is increased by Rs1304.24 lakhs ,because
inventory ,sundry debtors and cash and bank is increased from 2017-18 to 2018-19. The transferred Rs 188.32
lakhs additional to reserves and surplus in 2021-22.
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STATEMENT OF CHANGES IN WORKING CAPITAL FOR THE YEAR ENDED 2021-2022
(Rs in lakhs)
Particulars 2021 2022 Increase (+) Decrease (-)
A) Current Assets
Inventories 7075.18 9194.04 2118.90
Sundry Debtors 7197.89 6706.59 - 491.30
Cash and Bank 247.72 350.67 102.95 -
Loan and advances 1616.75 2070.42 453.67 -
Total of Current Assets (A) 16137.54 18321.72
B) Current Liabilities
Current Liabilities 8090.45 9202.11 1111.66
Provisions 586.14 354.42 228.72
Total of Current Liabilities (B) 8676.59 9556.53
Working Capital (A-B) 7460.95 8765.19
Increase in Working Capital 1304.24 - 1304.24
Total 8765.19 8765.19 2907.20 2907.20
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Conclusion: [2] I. M. pandey, FINANCIAL MANAGEMENT,
The conclusion are arrived at based on the 8TH Edition, 2002, Vikas Publishing House
Observations made on the present study except of the Private limited, NEW DELHI.
first year the study period it is observed that the fund
[3] Prasanna Chandra, FINANCIAL
for operation is on loss. It generated the funds in TH
MANAGEMENT, 5 Edition, 2002, TATA-
application of total funds. Except of the first two year MCGRAW HILL, NEW DELHI.
of the study of period, funds were utilized for
financing the working capital need. The study [4] http://en.wikipedia.org/cash flow statement
revealed a mixed trend of application and sources of [5] http:www.accountingcoach.com/cash flow
funds in respect of Secured and unsecured loans. statement explanation
References: [6] www.google.com.
[1] S. P. Jain, K.L. Narang, ADVANCED
ACCOUNTANCY, 10TH Edition, 2003,
Kalyani Publisher, Ludhiana.
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