1st CHAPTER

1. INTRODUCTION TO SUDY
The basic objective of financial management is to maximise
shareholders wealth. This is possible only when the company earns
sufficient profit. The amount of such profit largely depends upon the
magnitude of sales. However sales do not convert in to cash
instantaneously. There always a time gap between the sale of goods and
the receipt of cash. The cash flow and fund flow management control and
evaluate the flow of cash and funds from the company and to the company.
All the performance of the company largely depends on how effectively the
financial position of the company is managed. Money is needed for each
and every operation of the organization and finding it out for the day to day
operations. It is difficult task for finance managers. That is why the study
on cash flow and fund flow management has such an importance in an
organization.
We are used balance sheet and profit and loss account of
past five years as the source of this project report would help to analysis
the efficiency of cash flow management and fund flow management. There
are mainly two tools are used for this analysis. They are cash flow
statement and fund flow statement for the study. We have good confidence
to this project will complete properly and also this report will helps to the
company for their bright future and increasing the efficiency of the
company management.
1.2 BACKGROUND OF THE PROBLEM
Today every transactions of the management of the
companies and organizations are related to the cash and fund flow
management. Then this problem handles the cash flow and fund flow
management or financial management. In the present scenario of Modern
Techniques in compilation of various cash flow statement, fund flow
statement, new systems and trends are being adopted by many companies to
present their financial status before the public.
As a bachelor of commerce student it helps to practically
study and analyse the financial statements of a firm and also to get brief idea
about the company management and this will helps to understanding the
functions of the financial management through a study on cash flow and fund
flow management. The main problem of this study is how we will handled the
cash and fund flow management and to find the present condition of the cash
flow and fund flow management to have a understanding as to how such
accounting statements derived out of the various books of accounts
maintained by the company, also with the various accounting tools like the
cash flow statement, and fund flow statement.

1.3 OBJECTIVES OF THE STUDY

The primary objectives of the report is to study the cash flow and
fund flow statement of the NAGAJUNA HERBAL CONCENTRATES LTD and
to get a clear idea about the various financial strengths and weakness of the
company through measuring cash flow and fund flow management.

To find out the operating efficiency of the company.

To analyse the major application and the source of fund and cash.
To analyse the performance of cash flow and fund flow management.
To determine the financial position of the company.
To analysis the liquidity position of the company.

1.4 RESEARCH METHODOLOGY

The RESEARCH refers to the systematic method consisting of
enucleating the problem, formulating a hypothesis, collecting the facts or
data, analysing the acts and researching certain conclusions either in the form
of solutions towards the concerned or in certain generalizations for some
theoretical formulations.
1.5 RESEARCH DESIGN
The study is analytical research. The system of procedures and
techniques of analysis applied to quantitative data. Research design is the
arrangement of conditions for collection and analysis of data in a manner that
aims to combine relevance to the research purpose.
1.6 TOOLS USED FOR STUDY
1- RATIO ANALYSDIS
2- FUND FLOW STATEMENT
3- CASH FELLOW STATEMENT
1.6 (A) RATIO ANALYSES
Ratio analysis is the one of the most powerful tool of financial
analysis. It aims at making use of quantitative information for decision
making. A ratio is an expression of relationship between two figures two
amounts. It is a yard-stick which measures relationships between two
variables.
1.6(a) CURRENT RATIO
Current ratio is most common ratio for measuring liquidity. It
represents the ratio of current liabilities. Current assets are those, the amount

of which can be realized within a period of one year. Current liabilities are
those amounts which are payable within
a period of one year.
CURRENT RATIO = CURRENT ASSET / CURRENT LIABILITIES
1.6(b) INCOME FROM OPERATION TO CURRENT ASSET RATIO
Income from operation to current asset ratio shows the
relationships between income from operation and current asset. It includes all
the incomes from profit and loss account.
Formula for calculate the income from operation to current asset.
Formula; INCOME FROM OPERATION / CURRENT ASSET

1.6(c) PROPREITARY RATIO

Proprietary ratio relates to the shareholders fund to total assets.
This ratio shows the long term solvency of bank. It is calculated by dividing
shareholders funds by the total assets. Shareholders fund include total share
capital plus reserves and surplus minus fictitious assets. All the assets
exclude fictitious assets.
Formula; PROPRIETARY RATIO = SHAREHOLDERS FUND/TOTAL ASSET
1.6(d) CASH POSITION RATIO
Cash, bank balances and short term marketable are most liquid
assets of the bank. Since cash is most liquid asset, the financial analyst may
examine this ratio for his purpose of study. Formula for calculating the cash
position ratio is.
Formula; CASH POSITION RATIO= CASH & BANK / CURRENT LIABILITIES
1.6(e) CREDIT TO DEPOSIT RATIO
Credit to deposit ratio show the credit and deposit of the bank.
Creditors including lending of loans and advances. Deposits include the
amount receiving by the bank as deposits. It shows the relationships between
lending money and accepting deposits of the bank.
Formula; CREDIT TO DEPOSIT RATIO = CREDITS /DEPOSITS
1.6(f) CURRENT ASSET TO PROIPRIETERS FUND RATIO

Current asset to proprietors fund ratio shows the relationships

between current asset and proprietors fund. The purpose of calculating this
ratio is that to find out the proprietors fund invested in current asset.
Formula; CURRENT ASSET TO PROPRIETORS FUND RATIO= CURRENT
ASSET / PROPRIETORS FUND
1.6(g) ASSET INTEREST YIELD RATIO
Asset interest yield ratio is the relationships between the interest
from income and expenditure statement and asset from the balance sheet.
Formula: ASSET INTEREST YIELD RATIO= INTEREST REVENUE ASSETS
1.6(h) BREAK EVEN YIELD RATIO
Break even yield ratio is the relationship between the interest
expenses and the assets.
Formula; BREAK EVEN YIELD RATIO = INTEREST EXPENSES/ ASSETS
1.6(i) RETURN ON INVESTMENT RATIO
Return on investment ratio is calculated by the difference between
the net profit and total assets.
Formula; RETURN ON INVESTMENT RATIO = NET PROFIT/TOTAL ASSET*100
1.6(B) FUND FLOW STATEMENT
1.6(C) CASH FLOW STATEMENT
1.7 FUND FLOW STATEMENT
The fund flow statement is based on the concept of working capital.
The fund flow statement provides the details of fund movements. The funds
flow statements is a report on the movements of funds or working capital. It is
a summary of a firms inflow and out flow of funds. It tells us from where funds
have come and where funds have gone. Funds flow statement, net increase or
decrease in working capital is recorded.
1.8 CASH FLOW STATEMENT
Cash flow statements or statement of cash flows is a financial
statement that shows how changes in balance sheet and income accounts
affect cash and cash equivalents, and breaks the analysis down to operating,
investing and financing activities. The statement shows the income and
outgoing on cash. The statement assesses the capacity of the enterprises to
generate cash and utilize it. Thus a cash flow statement may be defined as a
summary of receipts and disbursements of cash for a particular period of time.

It also explains the reasons for the changes in cash position of the firm. Cash
flows are the cash inflows and outflows.

1.9 SOURCE OF DATA

There are two types of collecting data; they are primary data and
secondary data. Hence we have collected information through secondary data.
1.9(A) SECONDARY DATA
Secondary data those which have been collected by some other
person for there purpose and published. So the researcher is said to make the
use of secondary data if he make use of data already compiled by some other
person. Collection of secondary data has the advantage of being less
expensive less time consuming.
The data of NAGARJUNA HERBAL CONCENTRATES LTD for the
year (2007-2011-march) used in this study has been taken from secondary
source i.e., from published annual reports of the company. Editing,
classification, tabulation of the financial data, which are collected from
abovementioned sources, have done as per the requirements of the study.
1.10 SCOPE OF THE STUDY
The study is necessary student of Bachelor of commerce to
understand the final position of an organisation spent, how its cash flow
statements and fund flow statements, trial balances, balance sheet and also
other financial statements are compiled. How the surplus/deficit is worked out
before the statement is forwarded to the top management and such study
helps to compare theory with practical one.
1.11 LIMITATIONS OF THE STUDY

Study is based on past data.

Analysis and interpretation are purely based on the figures
represented in the reports and financial statements.
This study is only related to the financial performance of the
NAGARJUNA HERBAL CONCENTRATES LTD.