A CASE STUDY ON CASH FLOW OF NARAPANI SAVING & CREDIT

COOPERATIVE

A PROJECT WORK REPORT

By
Anita Shrestha
T.U.Registered Number : 7-2-31-85-2014
Public Youth Campus

Submited to
The Faculty of Managment
Tribhuvan University
Kathmandu

In Partial fulfillment of the requirement for the degree of

BACHELOR OF BUSINESS STUDIES (B.B.S)
Kathmandu

December,2017
A CASE STUDY ON CASH FLOW OF NARAPANI SAVING & CREDIT
COOPERATIVE
 A PROJECT WORK REPORT

By
Anita Shrestha
T.U.Registered Number : 7-2-31-85-2014
Public Youth Campus

Submited to
The Faculty of Managment
Tribhuvan University
Kathmandu

In Partial fulfillment of the requirement for the degree of

BACHELOR OF BUSINESS STUDIES (B.B.S)
Kathmandu

December, 2017
 Declaration

I hereby declare that the Project work entitled “ A CASE STUDY ON CASH FLOW OF
NARAPANI SAVING & CREDIT COOPERATIVES ” submitted to the Faculity of
Managment. Tribhuvan University, Kathmandu is an Original report under the
Supervision of Puspa Maharjan, Faculty member of Public youth campus, Kathmandu
and Submitted in Partial fulfillment of the requirement for the Degree of Bachelor of
Business Studies (BBS).This report has not been submitted to any other university or
Institution.

.............................
Anita Shrestha
98433766522
 1

CHAPTER 1

Introduction

Background
Cash is the basic input needed to keep the operations of the businessgoing on a
continuing basis; it is also the final output expected to be realized by selling the product
manufactured by the manufacturing unit. Cash is the both the beginning and the end of
the business operations.

Sometimes, it so happens that a business unit earns sufficient profit but inspite of this it is not
able to pay its liabilities when the becomes due. Therefore, a business should be always
try to keep sufficient cash neither more nor less because shortage of cash will threathen
the firms liquidity & solvency, whereas excessive cash willnot be fruitful utilized, will
simply remain ideal & affect the profitability of a concern. The management of cash also
assumes importance because it is perfect coincidence between the inflows and outflows
of cash giving rise to either cash outflows exceeding inflows or cash inflows exceeding
outflows.

Meaning of Cash Flow

Cash flow is the net amount of cash and cash-equivalents being transferred into and out
of a business. At the most fundamental level, a company’s ability to create value for
shareholders is determined by its ability to generate positive cash flows, or more
specifically, maximize long-term free cash flow. Cash is coming in from customers or
clients who are buying your products or services. If customers don't pay at the time of
purchase, some of your cash flow is coming from collections of accounts receivable.
Cash is going out of your business in the form of payments for expenses, like rent or a
mortgage, in monthly loan payments, and in payments for taxes and other account
payable.

Cash flow gives detailed information to the management about the sources of cash
inflows & outflows. For some businesses, like restaurants and some retailers, cash is
really cash - currency and paper money. The business takes cash from customers and
sometimes pays its bills in cash. Cash business have a special issue with keeping track of
cash flow, especially since they may not track income unless there are invoices or other
paperwork.

The final financial statement is the Statement of Cash Flows. It is sometimes referred to
as the sources and uses statement, as it shows the sources of cash for the company and
then how it was used over a period of time. The time period measured is typically a
month or quarter or year. Many people don’t focus on the Statement of Cash Flows. They
simply want to know if the company is profitable and how strong and liquid it is. Other
people will say that the statement of cash flow is the most important statement, because
they get paid for what they sell to companies through cash flow. For those in the credit
industry, we constantly hear “we can’t pay right now because we’re having cash flow
problems”, so understanding cash flow is very important to understanding the company’s
overall financial health and its operating profitability. The cash flow statement is broken
into three categories and then a final summary section. The three categories are cash
flows from operating activities, cash flows from investing activities, and cash flows from
financing activities. Once these cash flows are calculated, they are added together to
arrive at net cash flow, and then this is added to the cash balance at the beginning of the
period to calculate the cash balance at the end of the period. We will now review each of
these sections.

The net income amount also does not take into account changes is the value of the
company’s operating assets and liabilities. Changes in these accounts have an impact on
cash flow. For example, sales are recorded on the income statement, but any sales not yet
collected are shown as accounts receivable on the balance sheet. If the amount of
accounts receivable goes up during a year, the amount of the increase represents cash that
was earned but not yet collected. Therefore, the increase needs to be subtracted from Net
Income to arrive at actual cash flow. This same type of adjustment needs to be made for
all other operating assets and liabilities. To do this, we need to calculate the change
during the period in the amounts of such operating items as inventory, prepaid expenses,
accounts payable and accrued expenses.

Meaning of Cooperatives
Cooperatives are businesses organisations that are owned and run by a group of
individuals for their mutual benefit. Within a legal context they are an association or
corporation established for the purpose of providing services on a non-profit basis to its
shareholders or members who own and control it. Cooperatives exist for all types of
reason, to provide housing, food, and energy to running businesses such as bookshops to
artist cooperatives and beyond.
Cooperatives offer a way of developing new organisations that provide for people’s needs
based around different principles to mainstream capitalism. They allow development of
organisations that are accountable and democratic and even though they have to interact
within a market system they still offer an alternative way of doing things. They are just
one model of doing things and there are others which are equally valid. By adopting these
models of operation, people are moving towards more sustainable and democratic way of
doing things and that can only help move towards a better world.

Introduction of Narapani Saving & Credit Cooperative

Narapani Saving & Credit Cooperative established in 2066 BS under Nepalese
Cooperative Act 2048, is a financial institution permitted to carry out financial
transactions. The office is situated in Banasthali, Kathmandu. This institution is managed
by highly skilled personnel who have involved in different financial sector over the
country. The main aim of the financial institution is to provide attractive interest rates to
the collected principle & provide loans to honest P professionals & entrepreneurs to
promote their business, making them capable & independent in competitive financial
environment.

Objectives
Any work starts with a view of any objectives. Without any objective the work has to be
uncompleted and meaningless. According to TU, BBS 4th year student under Accounting
elective course of sartorial area prepare a field work report studying about any sectors or
organization as per their subject to analyze positive and negative of such sectors or
organization on the economy of the country, so that, I have studied on titled " Financial
Position ", which principally collects scattered money from its members and provides it
to them to develop or boost up economy. This is enabling to hold a prestigious image in
very short period. The main purpose for choosing is as:

(a) Measurement of Cash:

Inflows of cash and outflows of cash can be measured annually which arise from
operating activities, investing activities and financial activities.

(b) Generating Inflow of Cash:

Timing and certainty of generating the inflow of cash can be known which directly helps
the management to take financing decisions in future.

(c) Classification of Activities:

All the activities are classified into: operating activities, investing activities and financial
activities which help a firm to analyze and interpret its various inflows and outflows of
cash.

(d) Prediction of Future:

A Cash Flow Statement, no doubt, forecasts the future cash flows which helps the
management to take various financing decisions since synchronization of cash is possible.

(e) Assessing Liquidity and Solvency Position:

Both the inflows and outflows of cash and cash equivalent can be known, and, as such,
liquidity and solvency position of a firm can also be maintained as timing and certainty of
cash generation is known, i.e. it helps to assess the ability of a firm to generate cash.

Rationale

When we speak of financial sector reform, we have in mind two distinct but
complementary types of change that are needed in order to establish a modern financial
system capable of acting as the "brain of the economy" and allocating the economy's
savings in the most productive way among different potential investments. First, we mean
liberalization of the sector: putting the private sector rather than the government in charge
of determining who gets credit and at what price. Second, we mean establishing a system
of prudential supervision designed to restrain the private actors so that we can be
reasonably sure that their decisions will also be broadly in the general social interest.
Liberalization without supportive arrangements for proper supervision can easily lead to
anti-social behavior by bankers, of the forms referred to as "looting and gambling". This
provides a paradigmatic example of the more general proposition that establishment of a
market economy requires a change in the role of government rather than the elimination
of all government action, with the new role being one that focuses on providing an
environment within which the private sector can act effectively.

Methodologies

In order to study and evaluate of any matter, necessary data and information related to it
should be collected; is called data collection. Various methods should be adopted for
collection
Research Design
Although the current economic climate is presenting challenges for many large financial
institutions, well-positioned regionally and community-based banks and credit unions are
finding great opportunities to grow core deposits, increase their share of wallet, and
actively take market share from the competition.

Market Street Research is adept at combining our clients’ understanding of their

organization, their customers, and their competitors with our expertise in designing and
conducting top-quality marketing research. At Market Street Research, we are dedicated
to producing only that drives effective decision-making.

Population and Sample

The questions to carry out the role of financial institution in enhancing business activities
have brought about the following research questions.
To what extent do banks give loans to their customers?
Do customers pay back the loan as and when due?
What machinery is used in recovering the loans if not paid back?
What are the qualifications of managers handling the unit?

Types and sources of Data

To prepare this field work, data collection method is a basic work; such data are taken
from two ways while preparing field work report. They are:
a) Primary data:-
The data, which is first time collected for an investigation by an investigator or his /her
agent or research organization, is known as primary data. It is original in character and
just like raw material.
Method of collection Primary Data Are:
 Direct personal Interview.
 Indirect oral interview.
 Observation method.
 Information from local correspondents
 Mailed questionnaire method
 Schedules sent through enumerators
Balance sheet and Income Statement of the bank was observed.

b) Secondary Data:-
The data, which is not originally collected but obtained from published and unpublished
sources, are called secondary data. These data are not original in character. The sources
helping as secondary data for this field work reports are the annual book published by,
magazines and websites etc.

Techniques of Analysis

A) Qualitative analysis

Qualitative data was edited and analyzed using themes derived from the objectives of the
study which were the strategies used by Financial Institution in Nepal ; the financial
services extends to private investors in Nepal and the challenges Investors faces in
accessing credit

B) Quantitative analysis
Data collected from the primary survey were compiled, sorted, edited, cleaned, tabulated
and weighted and analyzed using Statistical Package for Social Scientists (SPSS)
computer aided program.

C) Report writing
After data analysis, the report writing process started. The report involved fived (5)
chapters from Introduction to the Study, Literature Review, Research Methodology,
Results and Interpretation and Discussion, Conclusion and Recommendations.

6. Limitation of the Study

However, there can be a number of issues with utilizing the statement of cash flows as an
investor speculating about different organizations. The simplest drawback to a cash flow
statement is the fact that cash flows can (but not always) omit certain types of non-cash
transactions. As the name implies, the statement of cash flows is focused exclusively on
tangible changes in cash and cash equivalents.

a) Like all financial statements, the statement of cash flows is useful in viewing the
organization from a given perspective. This perspective is useful in some ways and
limited in others.
b) The statement of cash flows primarily focuses on the change in overall available cash
and cash equivalents from one time period to the next (liquidity).
c) The statement of cash flows therefore has some limitations when assessing non-cash
operating items, and can therefore be misleading.
d) Cash flow statement shows only cash inflow and cash outflow. But, the cash balance
disclosed by the statement cannot reveal the true liquid position of the business.

e) Net Cash Flow disclosed by Cash Flow Statement does not necessarily mean net
income of the business because net income is determined by taking into account both
cash and non-cash items.

f) It does not give complete picture of the financial position of the business concern.

g) The preparation of cash flow statement is only postmortem analysis. There is no

projection of cash in future in this method.
h) It is not a substitute of Income statement.

i) The Accuracy of cash flow Statement is based on balance sheet. If balance sheet is
wrong, the cash Flow statement is also wrong.

j) It is not prepared on the basis of accounting accrual basis; hence the accuracy of cash
flow statement is questionable.

k) It is not suitable for judging the profitability a firms as non –cash item are no included
in the calculation of cash flow from operating activity.