1238 11 684 037

CASH MANAGEMENT
AT
BIMALA SPICES FOOD INSUTRIES PVT. LTD
BY
SIDRA
HT. NO 1238-11-684-037
Project submitted in partial fulfillment for the award of the degree of

BACHELORS OF BUSINESS ADMINISTRATION
VILLA MARIE DEGREE COLLEGE FOR WOMEN

(Affiliated to Osmania University)
Somajiguda, Hyderabad.
2011 - 2014
BIMALA SPICES FOOD INDUSTRIES (P) LTD

EXPERIENCE CERTIFICATE
16th Jan 2014
TO WHOM-SO-EVER IT MAY CONCERN
It is out pleasure to write on behalf of Ms. Sidra who has worked with Bimala
Spices Food Industry (p) ltd in the capacity of Accounting term from 26th April
2013 to 25th June 2013.
During this tenure of her work Ms. Sidra remained involved in her work
dedicated. We have found her to be a self starter who is motivated, duty
bound and hard working. She worked sincerely on her assignments and her
performance was Par excellence .All of our staff members are pleased with
her and feel comfortable in teaming and coordinating with her for the
realization of the organizational goals and objectives. We wish her all the
best in her future endeavor.
Sincerely,
Atif Bajwa,
Managing director
ACKNOWLEDGEMENT
I sincerely record my appreciation to all, who have contributed in preparing this report with
suggestions and critical evaluation. I am extremely thankful to Mr. Atif Bajwa head of
accounting department in Bimala spices food industries Pvt Ltd Who zestfully monitored
the growth of this project. He from time to time guided me in the right direction and took
care that I had enough time to complete my project. I also express my sincere thanks to
Shalini maam and Sridhar sir of PG department, for permitting me to do this project and
giving their valuable guidance in carrying out my project and having helped me at every
stage of my project.
I convey my sincere thanks to my faculty who helped me, directly or indirectly in bringing
this project successfully.
As an amateur in this field I am indebted to those who have readily responded to my
request for expert guidance.
SIDRA
(1238-11-684037)
DECLARATION
This to declare that the project entitled Study of cash management with special
reference to Bimala Spices Food Industries is an original and bonafide work done by
me for the partial fulfillment of requirement for the award of BACHELORS OF
BUSSINESS ADMINISTRATION from OSMANIA UNIVERSITY, HYDERABAD,
and has not been submitted earlier to any university or institution for the award of any
degree or diploma.
Date:
SIDRA
(1238-11-684-037)
Place
ABSTRACT
In a business anything done financially affects cash eventually. Cash is to a business is
what blood is to a living body. A business cannot operate without its life-blood cash, and
without cash management, there may remain no cash to operate. Cash movement in a
business is two-way traffic. It keeps on moving in and out of business. The inflow and
outflow of cash never coincides. Important aspect which is unique to cash management is
time dimension associated with the movement of cash. Due to non-synchronicity of cash
inflow and outflow, the inflow may be more than the outflow or the outflow may be more
than the inflow at a particular point of time. This needs regulation. Left to itself cash flow is
apt to follow monsoonic pattern, and showers of cash may be heavy, scanty or just normal.
Hence there is a dire need to control its movement through skillful cash management. The
primary aim of cash management is to ensure that there should be enough cash availability
when the needs arises, not too much, but never too little.
TABLE OF CONTENTS
Serial no:
TOPICS
INTRODUCTION
Chapter 1
PAGE no:
NEED
SCOPE
OBJECTIVE
DATA COLLECTION
METHODOLOGY
LIMITATIONS
Chapter 2
REVIEW OF LITERATURE
Chapter 3
COMPANY PROFILE
45
Chapter 4
DATA ANALYSIS
51
Chapter 5
FINDINGS AND CONCLUSIONS
63
Chapter 6
SUGGESTIONS & RECOMMENDATION
64
Chapter 7
BIBLOGRAPHY
65
List of tables
TOPIC
Cash flow format
Cash flow Statement 2008-2009
Page
no.
35
51
53
55
57
59
Cash Budget
61
List of figures
TOPIC
PAGE
NUMBER
Cash management
Structure of management
50
Graphical representation of cash flow statement 2008-2009
52
54
56
58
60
Graphical representation of Cash budget
62
INTRODUCTION
INTRODUCTION
Cash management is a broad term that refers to the collection, concentration, and
disbursement of cash. The goal is to manage the cash balances of an enterprise in such
a way as to maximize the availability of cash not invested in fixed assets or inventories
and to do so in such a way as to avoid the risk of insolvency. Factors monitored as a
part of cash management include a company's level of liquidity, its management of
cash balances, and its short-term investment strategies.
In some ways, managing cash flow is the most important job of business managers. If
at any time a company fails to pay an obligation when it is due because of the lack of
cash, the company is insolvent. Insolvency is the primary reason firms go bankrupt.
Obviously, the prospect of such a dire consequence should compel companies to
manage their cash with care. Moreover, efficient cash management means more than
just preventing bankruptcy. It improves the profitability and reduces the risk to
which the firm is exposed.
Cash management is particularly important for new and growing businesses. Cash
flow can be a problem even when a small business has numerous clients, offers a
product superior to that offered by its competitors, and enjoys a sterling reputation in
its industry. Companies suffering from cash flow problems have no margin of safety
in case of unanticipated expenses. They also may experience trouble in finding the
funds for innovation or expansion. It is, somewhat ironically, easier to borrow money
when you have money. Finally, poor cash flow makes it difficult to hire and retain
good employees.
It is only natural that major business expenses are incurred in the production of goods
or the provision of services. In most cases, a business incurs such expenses before the
corresponding payment is received from customers. In addition, employee salaries
and other expenses drain considerable funds from most businesses. These factors
make effective cash management an essential part of any business's financial
planning. Cash is the lifeblood of a business. Managing it efficiently is essential for
success.
NEED OF THE STUDY

These studies only concentrated the quantitative method.
The study is restricted only to The Bimala spices food Industries.pvt. Ltd. being a
case study the findings cannot be generalized.
SCOPE OF THE STUDY
It helps to take short term financial decision.
It indicates the cash requirement needed for plant and equipment

expansion programme.
It reveals the liquidity position of the firm by highlighting the various sources
of cash and its uses.
To find strategies for efficient management of cash
OBJECTIVES
Objectives of a project tell us why project has been taken under study. It helps us to know
more about the topic that is being undertaken and helps us to explore future prospects of
that organization. Basically it tells what all have been studied while making the project.
To learn about various aspects of Bimala spices food industries pvt ltd Cash
management.
To analyze the history of Bimala spices food industries pvt ltd.
To gain insights about functioning of Bimala spices food industries cash

management.
To explore the future prospects of

management.
Bimala spices food industries cash
DATA COLLECTION
TYPE OF DATA COLLECTED
Primary Data
Secondary Data
There are two types of data used. They are primary and secondary data.
Primary data is defined as data that is collected from original sources for a specific purpose.
Secondary data is data collected from indirect sources.
PRIMARY SOURCES
These include the survey or questionnaire method, as well as the personal interview
methods of data collection.
SECONDARY SOURCES
These i ncl ude books , t he i nt ernet , com p an y b rochur es, t he c om pan y w ebs
i t e, com pet i t ors websites etc, newspaper articles etc.
RESEARCH METHODOLOGY
R esearch i s a s yst e m at i c process of col l ect i ng and anal yz i ng i nform at i on

(dat a) i n ord er t o increase our understanding of the phenomenon about which
we are concerned or interested. A Research Design is the framework or plan for a study
which is used as a guide in collecting and analyzing the data collected. It is the blue
print that is followed in completing the study. The basic objective of research
cannot be attained without a proper research design. It specifies the methods and
procedures for acquiring the information needed to conduct the research effectively. It is
the overall operational pattern of the project that stipulates what information
needs to be collected, from which sources and by what methods.
The project has been successfully completed with the use of various sources of information
which has been bifurcated as primary source and secondary source.
The primary source is drawn up from the bank where the study has been done by preparing
questionnaires, face to face, discussion with the concerned people of the bank, by the ideas
received from them.
The secondary sources were collected from various periodicals i.e. journals, manuals,
circulars, reports, brochure and annual reports provided by the bank. Apart from them the
books, several websites of the bank and financial institutions was made use for the study
LIMITATIONS OF THE STUDY
These studies only concentrated the quantitative method.
The study is restricted only to Bimala Spices Food industries Ltd. being a
case study the findings cannot be generalized.
It was difficult getting time and access to senior level Finance/HR managers
(who had to be talked to, to get required information) due to their busy
schedules and prior commitments.
A few of the managers refrained from giving the required information as he

consideredme to be from their confidential domains
REVIEW OF
LITERATURE
CASH MANAGEMENT:
Cash management is one of the key areas of working capital management. A part from the
fact that it is the most liquid current assets, cash is the common denomination to which all
current assets can be reduced because the other major liquid assets that are receivables and
inventory get eventually converted into cash.
Cash Management Services Generally offered

The following is a list of services generally offered by banks and utilised by larger
businesses and corporations:
Account Reconcilement Services:

Balancing a checkbook can be a difficult process for a very large business, since it
issues so many checks it can take a lot of human monitoring to understand which
checks have not cleared and therefore what the company's true balance is. To
address this, banks have developed a system which allows companies to upload a
list of all the checks that they issue on a daily basis, so that at the end of the month
the bank statement will show not only which checks have cleared, but also which
have not. More recently, banks have used this system to prevent checks from being
fraudulently cashed if they are not on the list, a process known as positive pay.
Advanced Web Services:

Most banks have an Internet-based system which is more advanced than the one
available to consumers. This enables managers to create and authorize special
internal logon credentials, allowing employees to send wires and access other cash
management features normally not found on the consumer web site.
Armored Car Services:

Large retailers who collect a great deal of cash may have the bank pick this cash up
via an armored car company, instead of asking its employees to deposit the cash.
Automated Clearing House:

services are usually offered by the cash management division of a bank. The
Automated Clearing House is an electronic system used to transfer funds between
banks. Companies use this to pay others, especially employees (this is how direct
deposit works). Certain companies also use it to collect funds from customers (this
is generally how automatic payment plans work). This system is criticized by some
consumer advocacy groups, because under this system banks assume that the
company initiating the debit is correct until proven otherwise.
Balance Reporting Services:

Corporate clients who actively manage their cash balances usually subscribe to
secure web-based reporting of their account and transaction information at their lead
bank. These sophisticated compilations of banking activity may include balances in
foreign currencies, as well as those at other banks. They include information on
cash positions as well as 'float' (e.g., checks in the process of collection). Finally,
they offer transaction-specific details on all forms of payment activity, including
deposits, checks, wire transfers in and out, ACH (automated clearinghouse debits
and credits), investments, etc.
Cash Concentration Services:

Large or national chain retailers often are in areas where their primary bank does
not have branches. Therefore, they open bank accounts at various local banks in the
area. To prevent funds in these accounts from being idle and not earning sufficient
interest, many of these companies have an agreement set with their primary bank,
whereby their primary bank uses the Automated Clearing House to electronically
"pull" the money from these banks into a single interest-bearing bank account.
Lockbox services:
Often companies (such as utilities) which receive a large number of payments via
checks in the mail have the bank set up a post office box for them, open their mail,
and deposit any checks found. This is referred to as a "lockbox" service.
Positive Pay:
Positive pay is a service whereby the company electronically shares its check
register of all written checks with the bank. The bank therefore will only pay checks
listed in that register, with exactly the same specifications as listed in the register
(amount, payee, serial number, etc.). This system dramatically reduces check fraud.
Sweep Accounts:
are typically offered by the cash management division of a bank. Under this
system, excess funds from a company's bank accounts are automatically moved into
a money market mutual fund overnight, and then moved back the next morning.
This allows them to earn interest overnight. This is the primary use of money
market mutual funds.
Zero Balance Accounting:

can be thought of as somewhat of a hack. Companies with large numbers of stores
or locations can very often be confused if all those stores are depositing into a single
bank account. Traditionally, it would be impossible to know which deposits were
from which stores without seeking to view images of those deposits. To help correct
this problem, banks developed a system where each store is given their own bank
account, but all the money deposited into the individual store accounts are
10
automatically moved or swept into the company's main bank account. This allows
the company to look at individual statements for each store. U.S. banks are almost
all converting their systems so that companies can tell which store made a particular
deposit, even if these deposits are all deposited into a single account. Therefore,
zero balance accounting is being used less frequently.
Wire Transfer:
A wire transfer is an electronic transfer of funds. Wire transfers can be done by a
simple bank account transfer, or by a transfer of cash at a cash office. Bank wire
transfers are often the most expedient method for transferring funds between bank
accounts. A bank wire transfer is a message to the receiving bank requesting them
to effect payment in accordance with the instructions given. The message also
includes settlement instructions. The actual wire transfer itself is virtually
instantaneous, requiring no longer for transmission than a telephone call.
Controlled Disbursement:
This is another product offered by banks under Cash Management Services. The
bank provides a daily report, typically early in the day, that provides the amount of
disbursements that will be charged to the customer's account. This early knowledge
of daily funds requirement allows the customer to invest any surplus in intraday
investment opportunities, typically money market investments. This is different
from delayed disbursements, where payments are issued through a remote branch of
a bank and customer is able to delay the payment due to increased float time.
11
CASH MANAGEMENT STRATEGIES

Cash management aims at evolving strategies for dealing with various facets of cash
management. These facets include the following:
Optimum Utilization of Operating Cash

Implementation of a sound cash management programme is based on rapid generation,
efficient utilization and effective conversation of its cash resources. Cash flow is a circle.
The quantum and speed of the flow can be regulated through prudent financial planning
facilitating the running of business with the minimum cash balance. This can be achieved
by making a proper analysis of operative cash flow cycle along with efficient management
of working capital.
Cash Forecasting
Cash forecasting is backbone of cash planning. It forewarns a business regarding expected
cash problems, which it may encounter, thus assisting it to regulate further cash flow
movements. Lack of cash planning results in spasmodic cash flows.
Cash Management Techniques:

Every business is interested in accelerating its cash collections and decelerating cash
payments so as to exploit its scarce cash resources to the maximum. There are techniques in
the cash management which a business to achieve this objective.
Liquidity Analysis:
The importance of liquidity in a business cannot be over emphasized. If one does the
autopsies of the businesses that failed, he would find that the major reason for the failure
was their unability to remain liquid. Liquidity has an intimate relationship with efficient
utilization of cash. It helps in the attainment of optimum level of liquidity.
12
Profitable Deployment of Surplus Funds

Due to non-synchronization of ash inflows and cash outflows the surplus cash may arise at
certain points of time. If this cash surplus is deployed judiciously cash management will
itself become a profit centre. However, much depends on the quantum of cash surplus and
acceptability of market for its short-term investments.
Economical Borrowings
Another product of non-synchronization of cash inflows and cash outflows is emergence of
deficits at various points of time. A business has to raise funds to the extent and for the
period of deficits. Raising of funds at minimum cost is one of the important facets of cash
management.
13
Cash Forecasting and Budgeting

Cash budget
It is the most significant device to plan for and control cash receipts and payments. A cash
budget is a summary statement of the firms expected cash inflows and outflows over
a projected time period. It gives information on the timing and magnitude of expected cash
flows and cash balances over the projected period. This information helps the financial
manager to determine the future cash needs of the firm, plan for the financing of these
needs and exercise control over the cash and liquidity of the firm. The time horizon of the
cash budget may differ from firm to firm. A firm whose business is affected by seasonal
variations may prepare monthly cash budgets. Daily or weekly cash budgets should be
prepared for determining cash requirements if cash flows show extreme fluctuations. Cash
budgets for a longer intervals may be prepared if cash flows are relatively stable.
Cash forecasts
Cash forecast are needed to prepare cash budgets. Cash forecasting may be done on short
or long-term basis. Generally, forecasts covering periods of one year or less are considered
short-term; those exceeding beyond one year are considered long term.
Short-term Cash Forecasts
It is comparatively easy to make short-term cash forecasts. The important functions of
carefully developed short-term cash forecasts are:
To determine operating cash requirements.
To anticipate short-term financing.
To manage investment of surplus cash.
14
The short-term forecast helps in determining the cash requirements for a predetermined
period to run a business. If the cash requirements are not determined, it would not be
possible for the management to know-how much cash balance is to be kept in hand, to what
extent
bank financing be depended upon and whether surplus funds would be available to invest in
marketable securities. To know the operating cash requirements, cash flow projections have
to be made by a firm. As stated earlier, there is hardly a perfect matching between cash
inflows and outflows. With the short-term cash forecasts, however, the financial manager is
enabled to adjust these differences in favor of the firm. It is well known that, for their
temporary financing needs,
most companies depend upon banks. One of the significant roles of the short-term forecasts
is to pinpoint when the money will be needed and when it can be repaid. With such
forecasts in hand, it will not be difficult for thefinancial manager to negotiate shortterm financing arrangements with banks. This in fact convinces bankers about the ability of
the management to run its business. The third function of the short-term cash forecasts is to
help in managing the investment of surplus cash in marketable securities. Carefully and
skillfully designed cash forecast helps a firm to:
select securities with appropriate maturities and reasonable risk, avoid over and underinvesting and maximize profits by investing idle money.
Short-run cash forecasts serve many other purposes.

For example, multi-divisional firms use them as a tool to coordinate the flow of funds
between their various divisions as well as to make financing arrangements for these
operations. These forecasts may also be useful in determining the margins or minimum
balances to be maintained with banks. Still other uses of these forecasts are:
Planning reductions of short and long-term debt
Scheduling payments in connection with capital expenditures programmes
Planning forward purchases of inventories
Checking accuracy of long-range cash forecasts
Taking advantage of cash discounts offered by suppliers
Guiding credit policies.
15
Short-term Forecasting Methods

Two most commonly used methods of short-term cash forecasting are:
The receipt and disbursements method
The adjusted net income method.
The receipts and disbursements method is generally employed to forecast for

limited periods, such as a week or a month.
The adjusted net income method, on the other hand, is preferred for longer
durations ranging between few months to a year. Both methods have their Pros and cons.
The cash flows can be compared with budgeted income and expenses items if the receipts
and is bursements approach is followed. On the other hand, the adjusted income approach is
appropriate in showing a companys working capital and future financing needs.
Receipts and disbursements method:

Cash flows in and out in most companies on a continuous basis. The prime aim of receipts
and disbursements forecasts is to summarize these flows during a predetermined period.
In case of those companies where each item of income and expense involves flow
of cash, this method is favored to keep a close control over cash.
Three broad sources of cash inflows can be identified:
(i)
operating,
(ii)
non-operating, and
(iii)
financial.
16
Cash sales and collection from customers form the most important part of the operating
cash inflows. Developing a sales forecast is the first step in preparing cash forecast.
All precautions should be taken to forecast sales as accurately as possible. In case of cash
sales, cash is received at the time of sale. On the other hand, cash is realized after sometime
if sale is on credit. The time realizing cash on credit sales depends upon the firms credit
policy reflected in the average collection period. It can easily be noted that cash receipts
from sales will be affected by changes in sales volume the
firms credit policy. To develop a realistic cash budget, these changes should be accounted
for. If the demand for the firms products slackens, sales will fall and the average collection
period is likely to be longer which increases the chances of bad debts. In preparing cash
budget, account should be taken of sales discounts, returns and allowances and bad debts as
they reduce the amount of cash collections from debtors. Non-operating cash inflows
include sale of old assets and dividend and interest income. The magnitude of these items is
generally small. When internally generated cash flows are not sufficient, the firm resorts to
external sources. Borrowings and issuance of securities are external financial sources.
These constitute financial cash inflows.
The next step in the preparation of a cash budget is the estimate of cash outflows. Cash
outflows include:
(i )
operating outflows: cash purchases, payment of payables, advances to

suppliers,wa ges and sal ari es and ot he r o perat i n g ex penses,
(ii)
(iii)
capi t al ex pendi t ures ,

cont ract ual payments: repayment of loan and interest and tax
payments; and
(iv)
discretionary payments:ordi nar y and pre f erenc e di vi den d.
17
In case o f cr edi t pur chases, a t i m e l a g w i l l ex ist for cash payments. This will
depend on the credit terms offered by the suppliers. It is relatively easy to predict the
expenses of the firm over short run. Firms usually prepare capital expenditure
budgets; therefore, capital expenditures are predictable for the purposes of cash
budget. Similarly, payments of dividend do not fluctuate w idely and are paid on
specific dates. Cash out flow can also occur when the firm repays its long-term debt. Such
payments are generally planned and, therefore, there is no difficulty in predicting them
.Once the forecasts for cash receipts and payments have been developed, they can be
combined to obtain the net cash inflow or outflow for each month. The net balance for each
month would indicate whether the firm has excess cash or deficit. The peak cash
requirements would also be indicated. If the firm has the policy of maintaining some
minimum cash balance, arrangements must be made to maintain this minimum balance in
periods of deficit. The cash deficit can be met by borrowings from banks.
Alternatively, the firm can delay its capital expenditures or payments to creditors
or postpone payment of dividends. One of the significant advantages of cash budget is to
determine the net cash inflow or outflows o that the firm is enabled to arrange
finances. However, the firms decision for appropriate sources of financing should
depend upon factors such as cost and risk. Cash budget helps a firm to manage its cash
position. It also helps to utilize ideal funds in better ways. On the basis of cash
budget, the firm can decide to invest surplus cash in marketable securities and earn profits.
The virtues of the receipt and payment methods are:
It gives a complete picture of all the items of expected cash flows.
It is a sound tool of managing daily cash operations.
This method, however, suffers from the following limitations:

reliability is reduced because of the uncertainty of cash forecasts. For ex a m pl e,
collections may be delayed, or unanticipated demands may cause large disbursements.
It fails to highlight the significant movements in the working capital items.
18
Adjusted net income method:

This method of cash forecasting involves the tracing of working capital flows. It is
sometimes called the sources and uses approach.
Two objectives of the adjusted net income approach are:
(i)
To project the companys need for cash at a future date and
(ii)
To show whether the company can generate the required funds internally,
and if not, how much will have to be borrowed or raised in the capital market.
As regards the form and content of the adjusted net income forecast, it resembles the cash
flow statement discussed previously. It is, in fact a projected cash flow statement based on
proform a financial statements.
It generally has three sections: source s of cash , uses of cash and t headjusted cash
balance.
This procedure helps in adjusting estimated earnings on an accrual basis to a cash basis. It
also helps in anticipating the working capital movements. In preparing the adjusted net
income forecasts items such as net income, depreciation, taxes, dividends etc., can easily
be determined from the companys annual operating budget. Normally, difficulty is faced
in estimating working capital changes; especially the estimates of accounts receivable
(debtors) and inventory pose problem because they are influenced by factors such as
fluctuations in raw material costs, changing demand for the companys products and
possible delays in collections. Any error in predicting these items can make the reliability
of forecast doubtful .One popularly used method of projecting working capital is to use
ratios relating accounts receivable and inventory to sales.
For example, if the past experience tells that accountsreceivable of a company range
between 32 percent to 36 percent of sales, an average rate of 34 percent can be used. The
difference between the projected figure and that on the books will indicate the expected
increase or decrease in cash attributable to receivable.
19
The benefits of the adjusted net income method are:

It highlights the movements in the working capital items, and thus helps to keep a control
on firms working capital.
It helps in anticipating a firms financial requirements.
The major limitation of this method is It fails to trace cash flows, and therefore, its utility in
controlling daily cash operations is limited.
Long-term Cash Forecasting

Long-term cash forecasts are prepared to give an idea of the companys financial
requirements in the distant future. They are not as detailed as the short-term forecasts are.
Once a company has developed long-term cash forecast, it can be used to evaluate the
impact of, say, new product developments or plant acquisitions on the firms financial
condition three, five, or more years in the future. The major uses of the long-term cash
forecasts are:
It indicates as companys future financial needs, especially for its working capitalrequirem
ents.
It helps to evaluate proposed capital projects. It pinpoints the cash required to finance
these projects as well as the cash to be generated by the company to support them.
It helps to improve corporate planning.
Long-term cash forecasts compel each division to plan for future and to formulate projects
carefully. Long-term cash forecasts may be made for two, three or five years. As with the
short-term forecasts, companys practices may differ on the duration of long-term forecasts
to suit their particular needs. The short-term forecasting methods, i.e., the receipts and
disbursements method and the adjusted net income method, can also be used in long-term
cash forecasting. Long-term cash forecasting reflects the impact of growth, expansion or
acquisitions; it also indicates financing problems arising from these developments.
20
FACETS OF CASH MANAGEMENT

Cash management is concerned with the managing of:
(i)
cash flows into and out of the firm,
(ii)
cash flows within the firm, and
(iii)
cash balances held by the firm at a point of time by financing deficit or investing
surplus cash.
Sales generate cash which has to be disbursed out. The surplus cash has to be invested
while deficit has to be borrowed. Cash management seeks to accomplish this cycle at a
minimum cost. At the same time, it also seeks to achieve liquidity and control. Cash
management assumes more importance than other current assets because cash is the most
significant and the least productive asset that a firm holds.
However, cash is unproductive. Unlike fixed assets or inventories, it does not produce
goods for sale. Therefore, the aim of cash management is to maintain adequate control over
cash position to keep the firm sufficiently liquid and to use excess cash in some profitable
way. Cash management is also important because it is difficult to predict cash flows
accurately, particularly the inflows, and there is no perfect coincidence between the
inflows and outflows of cash. During some periods, cash outflows will exceed
cash inflows, because payment of taxes, dividends, or seasonal inventory builds up. At
other times, cash inflow will be more than cash payments because there may be large cash
sales and debtors may be realized in large sums promptly. Further, cash management is
significant because cash constitutes the smallest portion of the total current assets, yet
managements considerable time is devoted in managing it. In recent past, a number of
innovations have been done in cash management techniques. An obvious aim of the firm
these days is to manage its cash affairs in such a way as to keep cash balance at a minimum
level and to invest the surplus cash in profitable investment opportunities. In order to
resolve the uncertainty about cash flow prediction and lack of synchronization between
cash receipts and payments, the firm should develop appropriate strategies for cash
management.
21
Purpose of Cash Management

Cash management is the stewardship or proper use of an entitys cash resources. It serves as
the means to keep an organization functioning by making the best use of cash or liquid
resources of the organization.
The function of cash management is threefold:

1. To eliminate idle cash balances.
Every dollar held as cash rather than used to augment revenues or decrease expenditures
represents a lost opportunity. Funds that are not needed to cover expected transactions can
be used to buy back outstanding debt (and cease a flow of funds out of the Treasury for
interest payments) or can be invested to generate a flow of funds into the Treasurys
account. Minimizing idle cash balances requires accurate information about expected
receipts and likely disbursements.
2. To deposit collections timely.
Having funds in-hand is better than having accounts receivable. The cash is easier to
convert immediately into value or goods. A receivable, an item to be converted in the
future, often is subject to a transaction delay or a depreciation of value. Once funds are due
to the Government, they should be converted to cash-in-hand immediately and deposited in
the Treasury's account as soon as possible.
3. To properly time disbursements.
Some payments must be made on a specified or legal date, such as Social Security
payments. For such payments, there is no cash management decision. For other payments,
such as vendor payments, discretion in timing is possible. Government vendors face the
same cash management needs as the Government. They want to accelerate collections. One
way vendors can do this is to offer discount terms for timely payment for goods sold.
22
MOTIVES FOR HOLDING CASH:

The term cash with reference to cash management is used in the two senses.
Narrow senses: To cover currency and generally accepted equivalents of cash, such as
cheque, drafts and demand deposits in bank.
Broad senses: It includes near cash, assets such as marketable securities and time deposits
in bank. There are four primary motives for maintaining cash balances.
Transaction motives.
Precautionary motives.
Speculative motives.
Compensating motives.
Transaction motives:
An important reason for maintain cash balance is the transaction motive. This refers to the holding
of cash to meet routine cash requirements to finance the transactions which a firm carries on the
ordinary course of business.
Precautionary motives:
It will clearly determine the cash inflows and outflows in the ordinary course of business, a
firm may have to pay cash for purposes which cannot be predicted or anticipated.
Speculative motive:
It refers to the desire of a firm to take advantage of opportunities which present themselves
at unexpected moments and which are typically outside the normal course of business.
Compensative motive:
Bank provides a variety of service of business firms, such as clearance of cheque, of credit
information, transfer of funds.
23
FACTORS DETERMING CASH NEEDS

The factors that determine the required cash balance are.
Synchronization of cash flows

The need for maintaining cash balance arises from the non- synchronization of the inflows and
outflows of cash. If the receipts and payments of cash perfectly coincide or balance each other,
there would be no need for cash balances. The first consideration in determining the cash need is,
therefore, the extent of non synchronization of cash receipts and disbursements.
For the purpose, the inflows and outflows have to be forecast over a period of time, depending upon
the planning horizon which is typically a one-year period with each of the 12months
Short cost
Another general factor to be considered in determining cash needs is the cost associated with
a shortfall in the cash needs. The cash forecast presented in the cash budget would
reveal periods of cash shortages. In addition, there, may be some unexpected shortfall. Every
shortage of cash whether expected or unexpected- involves a cast depending upon the
severity, duration and frequency of the shortfall and how the shortage is covered.
Transaction costs:
Transaction costs are associated with raising cash to tide over the shortage. This is usually
the brokerage incurred in relation to the sale of some short-term near-cash assets such as
marketable securities.
Borrowing costs:
Borrowing costs associated with borrowing to cover the shortage. These include items such
as interest on loan, commitment charge and other expense relating to the loan.
24
Cost associated with deterioration of the credit rating:
Cost associated with deterioration of the credit rating which is reflected in shortage
of cash charges on loans, stoppage of supplies, demands for cash payment, refusal to sell
loss of image and the attendant decline in sales and profits.
Penalty rate
Penalty rates by banks to meet a shortfall in compensating balances.
Excess cash balance costs:

The cost of having excessively large cash balances is known as the excess cash balances
cost. If large funds are idle, the implication is that the firm has missed opportunities to
invest those funds and has thereby lost interest which it would otherwise have earned.
This loss of interest is primarily the excess cost.
Procurement and Management:

These are the costs associated with establishing and operating cash management staff
and activities. They are generally fixed and are mainly accounted for but salary,
shortage, handling of securities and so on.
Uncertainty and Cash Management

It Cannot be predicted with complete accuracy. The first requirement is a precautionary cushion
to cope with irregularities in cash flows, unexpected delays in collections and disbursements,
defaults and unexpected cash needs. The impact of uncertainty on cash management can,
however, is mitigated through. Finally, the impact of uncertainty on cash management strategy
us also relevant as cash flows
Improved forecasting of tax payments, capital expenditure, dividends and so on.
Increased ability to borrow through overdraft facility
25
CASH PLANNING
Cash flows are inseparable parts of the business operations of firms. A firm needs cash to
investing inventory, receivable and fixed assets and to make payment for operating
expenses in order to maintain growth in sales and earnings. It is possible that firm may be
taking adequate profits, but may suffer from the shortage of cash as its growing needs may
be consuming cash very fast. The cash poor position of the firm can be corrected if its
cash needs are planned in advance. At times, a firm can have excess cash with it if its cash
inflows exceed cash outflows. Such excess cash may remain idle. Again, such excess cash
flows can be anticipated and properly invested if cash planning is resorted to.
Cash planning is a technique to plan and control the use of cash. It helps to anticipate the
future cash flows and needs of the firm and reduces the possibility of idle cash balances
(which lowers firms profitability) and cash deficits.
Cash planning protects the financial condition of the firm by developing a projected cashsta
tement from a forecast of expected cash inflows and outflows for a given period.
The forecasts
may be based on the present operations or the anticipated future operations. Cash plans are
very crucial in developing the operating plans of the firm. Cash planning can be done on
daily, weekly or monthly basis. The period and frequency of cash planning generally
depends upon the size of the firm and philosophy of management.
Large firms prepare daily and weekly forecasts.
Medium-size firms usually prepare weekly and monthly forecasts.
Small firms may not prepare formal cash forecasts because of the nonavailability of information and smallscale operations. But, if the small firm prepares
cash projections, it is done on monthly basis. As a firm grows and business
operations become complex, cash planning becomes inevitable for its continuing
success
26
TECHNIQUES OF CASH MANAGEMENT

ANALYSIS:
The most important techniques of analysis and interpretation of cash management are us
follows.
COST CASH MODELS
CASH FLOW STATEMENT.
CASH BUDGETING
COST CASH MODELS

The following are the analytical model for cash management
Baumol model
Miller-orr model
Orglers model.
27
Baumol Model
The purpose of this model is to determine the minimizing cost amount of cash
that a financial manager can obtain by converting securities to cash. They are two element
Conversion cost
Opportunity cost
Conversion cost
Conversion costs are incurred each time marketable securities are converted into cash.
Total conversion cost per period = Tb\c

Where, b = cost per conversion.
T = total transaction cash need for the period.
C = value of marketable security sold to each conversion.
Opportunity cost :
Opportunity cost is derived from the cost\forfeited interest rate

(i) That could have been earned on the investment of cash balance.
I (c\2)
Where, c\2= the average cash balance
(i)=interest rate that could have been earned.
i(c\2)+(Tb\c)
28
MILLER- ORR MODEL:
To determine the optimum cash balance level which minimizes the cost of cash
management.
C=bE (n)\t+iE (M)
Where, b = the fixed cost per conversion.
E (M) = the expected average daily cash balance.
E (N) = the expected number of conversion.
t = the number of days in the period
(i) = the lost opportunity cost.
C = total cash management costs
29
ORGLERS MODEL:
According this model, an optimal cash management strategy can be determined through the use of a
multiple linear programme model. The construction of the model comprises three sections
Selection of the appropriate planning horizon.
Selection of the appropriate decision variables and
Formulation of the cash management strategy itself.
The advantage of linear programming model is that it enables coordinates of the optimal
cash management strategy with the other operations of the firm such as production and with
less restriction on working capital balances.
Model basically uses one year planning horizon with twelve monthly periods because of its
simplicity. It has four basic sets of decisions variables which influence cash management
of a firm and which must be incorporated into the linear programming model of the firm.
These are
Payment schedules.
Short-term financing.
Purchase and sale of marketable securities and
Cash balance.
The formulation of the model requires the financial managers first specify an objective
function and then specify a set of constraints. Orglers objectives function is to minimize
the horizon value to the net revenues from the cash budget over the entire planning period;
using the assumption that all revenues generated are immediately re-invested and that any
cost is immediately financed, the objective function represented the value of the net income
from the cash budget at the horizon by adding the net returns over the planning period.
Thus, the objective function recognizes each operation of the firm that generated cash
inflow or cash outflows as adding pr subtracting profit opportunities for the firm from its
cash management operations. In the objective function, decision variables which cause
inflows, such as payments on receivables, have positive coefficient
30
INVESTING SURPLUS CASH IN MARKETABLE

SECURITIES
There is a close relationship between cash and money market securities or other short-term
investment alternatives. Investment in these alternatives should be properly managed.
Excess cash should normally be invested in those alternatives that can be conveniently and
promptly converted into cash. Cash in excess of the requirement of operating cash balance
may be held for two reasons.
The working capital requirements of the firm fluctuate because of the elements of
seasonality and business cycles. The excess cash may build up during slack seasons
but it would be needed when the demand picks up. Thus, excess cash during slack
season is idle temporarily, but has a predictable requirement later on.
excess cash may be held as a buffer to meet unpredictable financial needs. A firm
holds extra cash because cash flows cannot be predicted with certainty. Cash
balance held to cover the future exigencies is called the precautionary balance and is
usually invested in the short-term money market investments until needed.
Instead of holding excess cash for the abovementioned purpose, the firm may meet its preca
utionary requirements as and when they arise by making short-term borrowings. The
choice between the short-term borrowings and liquid assets holding will depend upon the
firms policy regarding the mix of short-term financing. The excess amount of cash held by
the firm to meet its variable cash requirements and future contingencies should be
temporarily invested in
Marketable securities, which can be regarded as near moneys. A number of marketable
securities may be available in the market. The financial manager must decide about the
portfolio of marketable securities in which the firms surplus cash should be invested.
31
CASH FLOW STATEMENT

Cash flow statement is used in conjunction with the other financial statements, provides
information that enables users to evaluate the change in net assets of an enterprise, its
financial structure (including its liquidity and solvency), and its ability to affect the
amounts and timing of cash flow in order to adapt to changing circumstance and
opportunities. Cash flow information is useful in assessing the ability of the enterprises to
generate cash and cash-equivalents and enables users to develop models to assess and
compare the present value of the future cash flows of different enterprises. It also enhances
the comparability of the reporting of operating performance by different because it
eliminates the effects of
using different accounting treatments for the same transactions
and events
MEANING OF CASH STATEMENT:

A cash flow statement is a statement depicting change in cash position from one period to another.
A proper planning of the cash resource will enables the management to have cash available
whenever needed and put it to some profitable or productive use in case there is surplus cash
available.
32
UTILITY OF CASH FLOW ANALYSIS:

A cash flow statement is useful for short-term planning. A business enterprise needs
sufficient cash to meet its various obligations in the near future such as payment for
purchase of fixed assets, payment of debts maturing in the near future, expenses of the
business etc. A cash flow analysis is an important financial tool for the management. Its
chief advantage is as follows.
Helps in efficient cash management.
Helps in internal financial management.
Discloses the movement of cash.
Discloses success or failure of cash.
33
LIMITATION OF CASH FLOW STATEMENT:
Cash flow analysis is a useful tool of financial analysis. However, it has its own
limitation.
Cash flow statement cannot be equated with the income statement
The cash balance as disclosed by the cash flow statement may not represent the real
liquid position of the business.
Cash flow statement cannot replace the income statement or the fund flow
statement.
34
FORMAT OF CASH FLOW STATMENT

PARTICULARS
OPENING BALANCES
Cash in hand
Xxxxxxx
SOURCE OF CASH
Income Tax
Xxxxxxx
Sale of fixed Assets
Xxxxxxx
CASH FROM OPERATION

Net profit
Xxxxxxx
ADD Increase in other liabilities
Xxxxxxx
Decrease in Inventories
Xxxxxxx
LESS Decrease in Sundry Creditors
Xxxxxxx
Increase In Sundry Debtors
Xxxxxxxxxx
Xxxxxxxxx
TOTAL CASH AVAILABLE
Xxxxxxxxx
APPLICATION OF CASH
Loans and Advances
Xxxxxxxxxx
Secured Loan
Xxxxxxxxxx
Unsecured Loan
Xxxxxxxxxx
Central Excise
Xxxxxxxxx
CLOSING BALANCE
Cash in Hand
Xxxxxxx
TOTAL APPLICATION AVAILABLE
Xxxxxxxx
35
Cash flow activities

The cash flow statement is partitioned into three segments, namely:
1) Cash flow resulting from operating activities;
2) Cash flow resulting from investing activities
3) Cash flow resulting from financing activities.
The money coming into the business is called cash inflow, and money going out from the
business is called cash outflow.
Operating activities
Operating activities include the production, sales and delivery of the company's product as
well as collecting payment from its customers. This could include purchasing raw
materials, building inventory, advertising, and shipping the product
Operating cash flows include:
Receipts from the sale of goods or services
Receipts for the sale of loans, debt or equity instruments in a trading portfolio
Interest received on loans
Payments to suppliers for goods and services
Payments to employees or on behalf of employees
Interest payments (alternatively, this can be reported under financing activities in IAS
7, and US GAAP)
buying Merchandise
36
Items which are added back to [or subtracted from, as appropriate] the net income figure
(which is found on the Income Statement) to arrive at cash flows from operations generally
include:
Depreciation (loss of tangible asset value over time)
Deferred tax
Amortization (loss of intangible asset value over time)
Any gains or losses associated with the sale of a non-current asset, because associated
cash flows do not belong in the operating section.(unrealized gains/losses are also
added back from the income statement)
Dividends received
Revenue received from certain investing activities
Investing activities
Examples of investing activities are
Purchase or Sale of an asset (assets can be land, building, equipment, marketable

securities, etc.)
Loans made to suppliers or received from customers
Payments related to mergers and acquisition.
Proceeds from issuing short-term or long-term debt
37
Financing activities
Financing
activities
include
the
inflow
of
cash
from investors such
as banks and shareholders, as well as the outflow of cash to shareholders as dividends as

the company generates income. Other activities which impact the long-term liabilities and
equity of the company are also listed in the financing activities section of the cash flow
statement. It includes
Payments of dividends
Payments for repurchase of company shares
For non-profit organizations, receipts of donor-restricted cash that is limited to longterm purposes
Items under the financing activities section include:
Dividends paid
Sale or repurchase of the company's stock
Net borrowings
Payment of dividend tax.
38
Types of Short-term Investment Opportunities

The following short-term investment opportunities are available to companies in India to
invest their temporary cash surplus:
Treasury bills
Treasury bills (TBs) are short-term government securities. The usual practice in India is to
sell treasury bills at a discount and redeem them at par on maturity. The difference between
the issue price and the redemption price, adjusted for the time value of money, is return on
treasury bills. They can be bought and sold any time; thus, they have liquidity. Also, they
do not have the default risk.
Commercial papers
Commercial papers (CPs) are short-term, unsecured securities issued by highly credit
worthy large companies. They are issued with a maturity of three months to one year. CPs
are marketable securities, and therefore, liquidity is not a problem.
Certificates of deposits
Certificates of deposits (CDs) are papers issued By banks acknowledging
fixed deposits for a specified period of time. CDs are negotiableinstruments that make them
marketable securities.
Bank deposits
A firm can deposit its temporary cash in a bank for a fixed period of time. The interest
rate depends on the maturity period. For example, the current interestrate for a 30 to 45
days deposit is about 3 percent and for 180 days to one year is about 6-7 percent. The
default risk of the bank deposits is quite low since the government ownsmost banks in
India.
39
Inter-corporate deposits
Inter-corporate lending borrowing or deposits (ICDs) is a popular shortterm investment alternative for companies in India. Generally a cashsurplus company will
deposit (lend) its funds in a sister or associate companies or with outside companies with
high credit standing. In practice, companies can negotiate inter-corporate borrowing or
lending for very short periods. The risk of default is high, but returns are quite attractive.
Money market mutual funds
Money market mutual funds (MMMFs) focus on short-term marketable securities such as
TBs, CPs, CDs, or call money. They have a minimum lock-in period of 30 days, and after
this period, an investor can withdraw his or her money any time at a short notice or even
across the counter in some cases. They offer attractive yields; yields are usually 2 percent
above than on bank deposits of same maturity. MMMFs are of recent origin in India, and
they have become quite popular with institutional investors and some companies.
40
CASH BUDGETING
A firm is well advised to hold adequate cash balance but should avoid excessive balances. The firm
has, therefore, to assess its need for cash properly. The cash budget is probably the most important
tool in cash management. It is device to help a firm to plan and control the use of cash. It is a
statement showing the estimated cash inflows and cash outflows over the planning horizon. In the
other words, the net cash position of a firm as it moves from one budgeting sub period to another is
highlighted by the cash budget.
The various purposes of cash budgets are
To coordinates the timings of cash needs. It identifies the periods when there might
either be as shortage of cash or an abnormally large cash requirement.
It pinpoints the periods when there is likely to be excess cash.
It enables a firm which has sufficient cash to take advantage of cash discounts on its
accounts payable, to pay help obligation when due, to formulate dividend policy, to plan
financing of capital expansion and to help unify the production schedule during the year so
that the firm can smooth out costly seasonal fluctuations.
It helps to arrange needs funds on the most favorable terms and percents the accumulation
for excess funds. With adequate time to study his needs, the finance manage can select the
best alternative avenues of financing, the management would be forced to accept the best
terms offered in a difficult situation. These terms will not be as favorable, since the lack
of planning indicates to the lender, that there is an organizational deficiency. The firm,
therefore, represents a high risk. Cash budgeting or short-term cash forecasting is the
principal tool of cash management.
Developing credit policies and checking the accuracy of long term forecasting
Firms use multiple short-term forecasts of varying length and detail, suited to meet
different needs.
41
METHODS OF CASH BUDGETING

A RECEIPTS AND PAYMENTS METHODS:
The cash budget prepared under this method shows the timing and magnitude of expected
cash receipts and payments over the forecast period. It includes all expected receipts
and payments irrespective of how they are classified in accounting.
LONG TERM CASH FORECASTING:

Long-term cash forecasting are generally prepared for a period ranging from two to five years and
serve to provide a broad brush picture of a firms financing needs and availability of invertible
surplus in future. Such forecasts are helpful in planning capital investment methods outlays and
long-term financing.
REPORTS FOR CONTROL:

Cash reports, providing a comparison of actual developments with forecast figures, are helpful in
controlling and revising cash forecasts on a continual basis. Several types of cash reports may be
prepared the important ones are
Daily cash report

The daily cash report shows the opening balance, receipts, payments and the
closing balance on a daily basis.
Daily treasury report:

An amplification of the daily cash report, the daily treasury report provides a
comprehensive picture of changes in cash, marketable securities, debtors and creditors.
Monthly cash report:

The actual are compared with the budgeted figures and variances calculated. This report
shows the actual cash receipts and payments on a monthly basis.
42
CASH COLLECTION AND DISBURSEMENT:

The cash balance shown by a firm on its books is called the book, or ledger, balance whereas the
balance shown in its bank account is called the available, or collected, balance. The difference
between the available balance and the ledger balance is referred to as the float. There are two kinds
of float disbursement float and collection float, cheque issued by a firm create disbursement float.
The net float is the sum of disbursement float and collection float. It is simply the
difference between the firms available balance and its book balance. If the net float is positive
(negative) it means that the available balance is greater (lesser) than the book balance.
RATIO ANALYSIS:
An analysis of financial statements based on ratios is known as ratio analysis. Ratio analysis
involves the process of computing determining and resenting the relationship of items or group of
items of financial statements. Ratio analysis is a widely used tool of financial analysis. It can be
used to compare the risk and return relationship of firms of different sizes. It is defined as the
systematic use of ratio to interpret the financial statements so that the strengths and weaknesses of a
firm as well as its historical performance and current financial condition can be determined. The
term ratio refers to the numerical or quantitative relationship between two items.
Advantage of ratio analysis:

The advantages of ratio analysis are as follows
Forecasting
Managerial control.
Facilitates communications.
Measuring efficiency.
Facilitating Investment decisions
Useful in measuring financial solvency.
Inter firm Comparisons
43
Steps in ratio analysis:
Selection of relevant information.
Comparison of calculated ratios.
Interpretation and reporting.
Limitation of Ratio Analysis:
The analyst should have a thorough knowledge and experience about the firm and
industry.
Ratios are not an end in themselves but they are means to achieve a particular
purpose or end.
Ratios are interred- related and therefore a single ratio cannot convey meaning. It
has to be interpreted with reference to other related to draw meaningful conclusions.
Ratio will be meaningful if they can be compared with standards or norms.
Ratio analysis will be fruitful only if the conclusions are conveyed quickly to the
management.
Ratio analysis becomes redundant during periods of heavy price.
Fluctuations.
44
COMPANY PROFILE
BIMALA SPICES FOOD INDUSTRIES

PRIVATE LTD
BRIEF HISTORY
Bimala Spices Food Industries Private Limited (BSF) has been in the business of
processing and marketing spices and related food products since 1988 and is an active
member of the Spices Board of India.
The products of BSF are Agmark certified for quality. They are processed and packed for
market using best in business operating procedures and packing technology to provide
optimum freshness and self life, while retaining the authenticity of flavors.
BSF was promoted by Shri Nandakishore Goel along with his son Shri Manoj Goel, who
shared his passion for spices, their aromas and the fascination of their contribution not only
to the development of culinary delights in global cuisines but also for bringing diverse
cultures from far off corners of the world to interact with one another in last few centuries.
Belonging to a top miller's family of India, the Goel father and son team had their roots
firmly embedded in food industry and had a profound understanding of the intricacies of
food business and the diverse variables that play within and outside its business
environment. Thus venturing into the business of processing, blending and marketing high
quality premium grade spices in an organized manner and making it a success was only
natural for them.
MISSION
Together they brought BSF into existence with a mission to....
"provide customers with high quality premium grade whole ,processed and blended
spices (Masalas) produced in a carefully controlled contamination free production
environment and packed for optimum shelf-life, freshness and flavour preservation
with commitment, care and concern while generating value for customers through
continuous innovation and research."
45
GROWTH AND EVOLUTION

Over the years BSF has developed a product range encompassing over 95 products which
are classified under 5 broad categories as shown in the adjoining box. All the products from
BSF are used, enjoyed and appreciated by a very large group of consumers across the
demographic and cultural spectrum not only in India but also overseas.
At BSF it is a continuous endeavor to improve the processing systems / technology and
create innovating products for ease of application (As required by the changing lifestyles)
in kitchens around the world and keep providing the little ingredient that makes a world of
difference to gourmets of fine cuisine.
BSF Spices is a major processor of spices for domestic and international kitchen shelf use.
The company has a significant presence as a major brand in domestic market. It has a well
established and professionally managed spices processing facility in the heart of major
spice growing area. The plant is located in the heart of Hyderabad city on a 12,140 Sq/Mt
of land and 40,000 Sq/ft of plant & Storage building area. At present BSF Processes and
packs 14 variants in spice powders,18 variants in curry powder & masalas and 2 variants in
instant mixes besides packing whole Stick & Stickles Red Chilies.BSF has successfully
completed R & D of over 140 products, which include Instant Mixes, Seasonings,
Chutneys, Deserts and many more to be launched in decent and convenient consumer packs
in the coming months in domestic and international market.BSF believes in high standards
of processing and quality control for all the products that are processed in its plant. To
ensure the quality of products that meet the most stringent standards in any part of the
world, the company has the state-of-the-art spices processing unit with sophisticated lab
analysis at different stages of processing. Further before processing, the raw material is
carefully screened and selected and processed under quality control checks at every stage of
processing. By virtue of the hi tech processing plant all products processed by BSF retains
the natural color, taste and aroma.BSF has got all necessary infrastructure and in-house
facility for processing 3,000 tonnes of spice powders and 600 tonnes of instant mixes per
annum.BSF is looking for fruitful association for marketing its products overseas with
existing reputed company in the trade. BSF is also interested in offering its plant's spare
capacity for utilization to meet specific requirements of foreign /domestic buyer.
46
QUALITY
For the Flavors India with 26 years of standing, quality is the day to success. Our plant has fully
equipped quality control laboratories where the raw materials, in process and finished products are
rigorously tested for their quality standards. Our qualified manufacturing and technical personnel
deal with material handling, shop floor and production activities. We maintain stringent quality
control measure and hygienic condition as per the specification of Bureau of India Standards. The
research and development wing devotes its fulltime towards better product development, cost
.effective methods and new products. Bimala Spices Food Industries Private Limited is certified
company ensuring the quality systems practiced .with a commitment towards safe environment we
have development an efficient Effluent Treatment Plant fulfilling the pollution control Board needs.
CUSTOMER BASE:
Our motto being customer is our Boss a good amount of time and skill is put in and translated
into action by formulating new products as demands by the customers. Our products command its
reputation in the market for the past 3decadesand more in leading food processing companies
throughout the country and overseas. Our customer service is always prompt and sure as the sun
rises and sun set
47
PRODUCTS
Whole spices BSF offers premium grade of whole spices originating from India. They are
procured at source and packed in BSF for preservation of authentic flavor and extract
optimum shelf life.
Powdered spices
BSF offers a wide range of prime grade pure powdered spices primarily of Indian origin
Produced with exceptional care to preserve their authentic flavor and freshness.
Blended spices (masalas)
BSF produces blended spices (masalas) that can be used specifically in different Indian
cuisines. Different Spices and Herbs are blended in exacting proportions to provide the
desired flavors in the dish. Instant masalas are also offered for quick preparations.
Table top sprinklers.
A distinctly different formulation of spices and herbs go Inyo production of diverse

BSF sprinklers which are used by gourmets for seasoning their food as per their liking.
Flours and Other food.
Apart from spices, BSF also supplies a variety of flours and other food items.
BSF manufactures a few select food products true to its tradition of optimal flavor and
preservation of natural nutrients.
The food products manufactures by BSF are

1. Whole wheat Atta
2. Iodized salt
48
Table sprinklers
BSF offers a premium grade exotic spice / herbs blends and packs them as convenient
table top sprinklers to enable connoisseurs of good food to add them according to their
preferred taste / flavor and enjoy their food in the best possible way.
Exotic Table Top sprinkler
1. Garlic salt
2. Garlic and herbs
3. Mix herbs garnish
4. Pepper crush
5. Chilli crush
6. Kasoori methi
7. Roasted cumin
8. Garam masala exotic
9. Tea masala
10. Chatpata fruit masala
49
STRUCTURE OF MANAGEMENT
50
DATA ANALYSIS AND

INTERPRETATION
CASH FLOW STATEMETN (2008-09)
PARTICULAR
31-03-2008
31-03-2009
OPENING BALANCES
cash in hand
61738
SOURCE OF CASH
Central excise
2151
779
1372
Secured loan
3363880
3406134
4225
Net profit
247341
206964
40377
ADD: Increase in sundry

creditors
3363458
3747384
383926
Less increase in other liabilities
300217
300466
249
Less increase in inventories
7310787
7466168
155381
Increase in sundry debtors
2154425
2473039
318614
16742259
17600934
55921
Purchase of fixed Assets
744630
749327
4697
Loans and Advance
162581
194320
31739
Income tax
77494
84556
7062
CASH FROM OPERATION
-49443
APPLICATION OF CASH
CLOSING BALANCE
Cash in hand
TOTAL APPLICATION
AVAILABLE
12423
984705
1028203
51
55921
GRAPHICAL REPRESENTATION OF CASH FLOW

STATMENT 2008-2009
70000
60000
50000
40000
30000
20000
10000
0
OPENING BALANCE
CASH AVAILABLE
CLOSING BALANCE
INTERPRETATION
.The concern purchase high asset in the year 2009.It clearly determine the outflow
of cash in the concern.
Closing balance is 12423 and The opening balance is 61738. .it indicates that the
cash is not properly managed in the concern. . S o t he conce rn shoul d t ake
necessary step to overcome the default.
52
CASH FLOW STATEMENT 2009-10

PARTICULARS
31-3-2009
31-3-2010
OPENING BALANCES
Cash in Hand
12423
SOURCE OF CASH
Income TaX
194320
206000
2650
Sale of fixed asset
726292
749827
23035
Net profit
247341
261547
14206
Add increase in other liabilities
300466
379275
78809
Decrease in inventories
7466168
5698609
1767559
LESS Decrease in Sundry

Creditor
Increase in sundry debtors
3747384
2470569
1276815
2473039
2651776
178737
TOTAL CASH
AVAILABLE
15155010
12417103
443130
Loans and advances
194320
206000
11680
Secured loans
3406134
3135484
270650
Unsecured loan
1255000
1105000
150000
Central excise
779
5313
4534
CASH FROM
OPERATION
405022
APPLICATION OF CASH
CLOSING
BALANCE
Cash in hand
TOTAL APPLICATION
AVAILABLE
6266
4856233
445177
53
443130

STATMENT 2009-2010
50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
OPENING BALANCE
CASH AVAILABLE
CLOSING BALANCE
INTERPRETATION
Opening balance is 12423 and The closing balance is 6266. .it indicates that the
cash is not properly managed in the concern. . S o t he conce rn shoul d t ake
necessary step to overcome the default.
54

PARTICULARS
31-3-2010
31-3-2011
OPENING BALANCES
Cash in Hand
6266
SOURCE OF CASH
Central excise
5313
2596
2717
Net profit
261547
267548
5999
Add increase in sundry

debtors
Increase in other liabilities
2470569
3553092
1082523
379275
530420
151145
5698609
4378883
1319726
LESS Increase in sundry

debtors
2651776
4542399
1890623
11467089
13274938
677753
Loans and advances
206000
332424
126424
Secured loans
3135484
3088824
46660
Unsecured loan
1105000
900000
205000
Purchase of fixed asset
726292
991175
264883
Income tax
81906
107401
25495
CASH FROM
OPERATION
668770
APPLICATION OF
CASH
CLOSING BALANCE
Cash in hand
TOTAL APPLICATION
AVAILABLE
9291
5254682
5419824
55
677753

STATMENT 2010-2011
80000
70000
60000
50000
40000
30000
20000
10000
0
OPENING BALANCE
CASH AVAILABLE
CLOSING BALANCE
INTERPRETATION
Closing balance is Rs 9291 lakhs and The opening balance is Rs 6266 lakhs. It
indicates that the cash is properly managed in the concern.
The borrowing of concerns high in the year 20010-11 it indicates that the concern
uses more loan. The concern should reduce to borrow the money from the various
resources. It leads to take more advantage to the borrowers.
56

PARTICULARS
31-3-2011
31-3-2012
OPENING BALANCES
Cash in Hand
9291
SOURCE OF CASH
Unsecured loan
900000
1200000
300000
Sale of fixed asset
991175
792972
198203
Net profit
267546
309347
41801
Add increase in other liabilities
530420
531981
1561
4378883
3950640
428243
LESS Decrease in Sundry

Creditor
3553092
3258702
294390
Decrease in sundry debtors
4542399
3652395
890004
TOTAL CASH
AVAILABLE
APPLICATION OF
CASH
15163515
13696037
1574713
Loans and advances
332424
377608
45184
unSecured loans
3088824
15892601
1499564
Central Excise
2596
24695
22099
Central excise
107401
108612
1211
CASH FROM OPERATION
1067219
CLOSING BALANCE
Cash in hand
TOTAL APPLICATION
AVAILABLE
6655
3531245
16403516
57
1574713

STATMENT 2011-2012
18000
16000
14000
12000
10000
Series 1
8000
6000
4000
2000
0
OPENING BALANCE
CASH AVAILABLE
CLOSING BALANCE
INTERPRETATION
Closing balance is 6655 and The opening balance is 9291 . .it indicates that the cash
is not properly managed in the concern.
The total application available is more in 2012 as compare to 2011 so cash
management can be done.
58

PARTICULARS
31-3-2012
31-3-2013
OPENING BALANCES
Cash in Hand
6655
SOURCE OF CASH
Central excise
24695
9867
14828
Secured loan
1589260
1163089
350000
Net profit
309347
413155
103803
Add increase in other

liabilities
Less increase in inventories
531981
735107
203126
3950640
4018625
67985
ADD Decrease in Sundry

Creditor
Decrease in sundry debtors
3258702
3250590
294390
3652395
3596559
55836
TOTAL CASH
AVAILABLE
13317020
13186992
658156
Purchases of fixed asset
792972
944278
151306
Loans and advances
377608
432320
54712
Secured loans
1163089
1589260
426171
Income tax
108612
114142
5530
CASH FROM
OPERATION
1067219
APPLICATION OF CASH
CLOSING BALANCE
Cash in hand
TOTAL APPLICATION
AVAILABLE
20437
2442281
3080000
59
658156

STATMENT 2012-2013
70000
60000
50000
40000
Series 1
30000
20000
10000
0
OPENING BALANCE
CASH AVAILABLE
CLOSING BALANCE
INTERPRETATION
Opening balance is 6655 and The closing balance is 20437 . .it indicates that the
cash is properly managed in the concern.
60
CASH BUDGET
61
GRAPHICAL REPRESENTATION OF CASH BUDGETING
INTERPRETATION:
In the above table it clearly determines the availability of the cash balance in the
subsequent year. It will clearly determine the minimum cash balance requirement of the
concern. In the 2005-06 leads to higher need of cash balance 11.62 lakhs. The cash balance
is highly required for the day- to-day transaction.
62
FINDINGS AND
CONCLUSION
FINDINGS
In the year 2005-06 is leads to higher requirement of cash balance 11.62 lakhs. Cash
reflects the liquidity position of the concern is reduced in the year 2005-06 0.06 lakhs
decreasing cash position indicated that the company is not managing its cash position
satisfactorily.
CONCLUSION
Analysis and Interpretation of the financial data of The Bimala spices food industries (p)
ltd, ascertain the cash position of the firm. The results explores that the firm is unable to
meet its short term obligations. The concern should reduced the long term loan and obtain
the profit. The concern should take various measures to increase the net profit.
63
RECOMMENDATIONS
AND
SUGGESTIONS
SUGGESTIONS
The various suggestions are followed after analyzing the main finding of this study.
The cash management of the company is failed to strengthen the cash position so the
company so required to table steps to improve the cash position by concentrating on
receivables, inventories avoiding to much on borrowings.
The company failed to manage the receivable in the normal level because of
poor performance of the collection procedure and inefficient performance related
with managing the receivables.
The cash and bank balance indicate high liqui dity position of a company,
Bimala spices food industries pvt ltd cash including bank balance is at a
optimum level and it is enough to meet day to day requirement.
64
BIBLIOGRAPHY
BIBLIOGRAPHY
Text books:
1. Financial management, I M Pandey, 10th edition, vikas publishing house pvt ltd
2. Accounting for management, S N Maheshwari, S K Maheshwari, vikas publishing
house pvt ltd.
Websites:
http://www.slideshare.net/soagahameedgbola/basics-of-cash-management-for-financialmanagement-reporting#
http://en.wikipedia.org/wiki/Cash_management
http://www.bsfspices.com/about.htm
65

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CASH MANAGEMENT

Project submitted in partial fulfillment for the award of the degree of

VILLA MARIE DEGREE COLLEGE FOR WOMEN

BIMALA SPICES FOOD INDUSTRIES (P) LTD

FINDINGS AND CONCLUSIONS

SUGGESTIONS & RECOMMENDATION

Cash flow format

Cash flow Statement 2008-2009

Cash flow Statement 2009-2010

Cash flow Statement 2010-2011

Cash flow Statement 2011-2012

Cash flow Statement 2012-2013

Graphical representation of cash flow statement 2008-2009

Graphical representation of cash flow statement 2009-2010

Graphical representation of cash flow statement 2009-2010

Graphical representation of cash flow statement 2010-2011

Graphical representation of cash flow statement 2011-2012

Graphical representation of Cash budget

NEED OF THE STUDY

SCOPE OF THE STUDY

It helps to take short term financial decision.

It indicates the cash requirement needed for plant and equipment

To find strategies for efficient management of cash

To analyze the history of Bimala spices food industries pvt ltd.

To gain insights about functioning of Bimala spices food industries cash

To explore the future prospects of

Bimala spices food industries cash

R esearch i s a s yst e m at i c process of col l ect i ng and anal yz i ng i nform at i on

LIMITATIONS OF THE STUDY

These studies only concentrated the quantitative method.

A few of the managers refrained from giving the required information as he

Cash Management Services Generally offered

Account Reconcilement Services:

Advanced Web Services:

Armored Car Services:

Automated Clearing House:

Balance Reporting Services:

Cash Concentration Services:

Zero Balance Accounting:

CASH MANAGEMENT STRATEGIES

Optimum Utilization of Operating Cash

Cash Management Techniques:

Profitable Deployment of Surplus Funds

Cash Forecasting and Budgeting

Short-run cash forecasts serve many other purposes.

Short-term Forecasting Methods

The receipts and disbursements method is generally employed to forecast for

Receipts and disbursements method:

operating outflows: cash purchases, payment of payables, advances to

capi t al ex pendi t ures ,

discretionary payments:ordi nar y and pre f erenc e di vi den d.

This method, however, suffers from the following limitations:

Adjusted net income method:

To project the companys need for cash at a future date and

The benefits of the adjusted net income method are:

Long-term Cash Forecasting

FACETS OF CASH MANAGEMENT

cash flows into and out of the firm,

cash flows within the firm, and

Purpose of Cash Management

The function of cash management is threefold:

MOTIVES FOR HOLDING CASH:

FACTORS DETERMING CASH NEEDS