INTRODUCTION

A cash flow statement is a financial statement that shows a

company's incoming and outgoing money (sources and uses of cash) during a time
period (often annually or quarterly). The statement shows how changes in balance
sheet and income accounts affected cash and cash equivalents, and breaks the analysis
down according to operating, investing, and financing activities. As an analytical
tool, the statement of cash flows is useful in determining the short-term viability of a
company, particularly its ability to pay bills.

Features

Cash flow statement explains cash movement under the following three different
heads, namely:
 Cash flow from operating activities.
 Cash flow from investing activities.
 Cash flow from financing activities.

Sum of these three types of cash flow reflects net increase or decrease of cash and
cash equivalents
 Cash: It consists of cash in hand and demand deposits.
 Cash equivalent: It consists of short-term highly liquid investments having
maturity less than months, Which can be readily converted into cash without
decline in its value. In other words, these investments can be converted into
cash without any risk.

Operating activities:
They are principal revenue producing activities of the enterprises other than investing
and financing activities. Examples of cash flow from operating activities are as
following:
 Cash receipt from the sale of goods and the rendering of services;
 Cash receipts from royalties, fees, commissions and other revenue;
 Cash payments to suppliers for goods and services;

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Investments Activities:
The activities of acquisition and disposal of long-term assets and other investments
not included in cash equivalents are investing activities. They include making and
collecting loans, acquiring and disposal of debt and equity instruments, property and
fixed assets, etc. Examples of cash flow arising from investing activities are:
 Cash payment to acquire fixed assets (including intangibles). These payments
include those relating to capitalization, research and development costs and
self-constructed fixed assets;
 Cash receipts from disposal of fixed assets (including intangibles).
 Cash payment to acquire shares, warrant or debt instruments of other
enterprises and interests in joint ventures (other than payments for those
instruments considered to be cash equivalents and those held for dealing or
trading purpose).
 Cash receipts from disposal of shares, warrants or debt instruments of other
enterprises and interests in joint ventures (other than receipts from those
instruments considered to be cash equivalents and those held for dealing or
trading purposes).

Financing Activities: They are the activities which result in change in size and
composition of owner’s capital and borrowing of the organization. These include
receipts from issuing shares, debentures, bonds, borrowing and payment of borrowed
amount, loan, etc.
 Sale of shares
 Buy back of shares
 Redemption of preference shares
 Issue / redemption of debentures
 Long-term loan / payment thereof
 Dividend / interest paid.

Cash flow from operating activities

It can be derived either from direct method or indirect method.

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  Direct Method: In this method, gross receipts and gross payment of cash are
disclosed.
 Indirect Method: In this method, profit and loss account is adjusted for the
effects of transaction of non-cash nature.

Interest Received

 From investment. It is in investment activities.

 From short-term investment classified, as cash equivalents should be
considered as cash inflows from operating activities.
 On trade advances and operating receivables should be in operating activities.

Interest Paid
 On loans / debts are in financing activities.
 On working capital loan and any other loan taken to finance operating
activities are in operating activities.

Inflow of cash:
Cash flows into the business from different activities, when receipts are more than
payments, receipt from sale of property and securities, from issue of shares and bonds,
i.e., Operating, Investing, and Financing Activities, there is a quick look at it.

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Outflow of Cash:
The cash flows out of the business when expenditures are more than receipts, when
a property is acquired or purchased, when debs are paid, and while paying dividend
these are categorized as Operating, Investing, and Financing Activities

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 IMPORTANCE OF CASH FLOW STATEMENT

Needless to say that Cash Flow Statement is particularly useful in short-term

planning. In order to meet the various obligations, a firm needs sufficient amount of
cash (e.g., payment for expenses, purchase of fixed assets, payments for dividend and
taxes etc.). It helps the financial manager to make a cash flow projection for
immediate future taking the data relating to cash from the past records.
As such, it becomes easy for him to know the cash position which may either result in
a surplus or a deficit one. However, Cash Flow Statement is an important financial
tool for the management to make an estimate relating to cash for the near future.

The importance of Cash Flow Statement is presented below:

(a) Helps to make Cash Forecast:

Cash Flow Statement, no doubt, helps the management to make a cash
forecast for the near future. A projected Cash Flow Statement helps the management
about the cash position which is the basis for all operations and thus, the management
finds the light relating to cash position, viz., how much cash is needed for a specific
purpose, sources of internal and external issues etc.

(b) Helps to the Internal Management:

It helps the internal management to determine the financial policy to be
adopted in future since it supplies information relating to funds, e.g., taking decision
about the replacement of fixed assets or repayment of long- term liabilities etc.

(c) Reveals the cash position:

It is a significant pointer about the movement of cash, i.e., whether there is
any increase in cash or decrease in cash and the reasons thereof which helps the
management. Moreover, it explains the reasons for a small cash balance even though
there is sufficient profit or vice-versa. Besides, the management can compare the
original forecast with the actual one in order to understand the trend of movement of
cash and the variation thereof.

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(d) Reveals the result of Cash Planning:

How far and to what extent, the cash planning becomes successful, that story
is told by the analysis of Cash Flow Statement. The same is possible by making a
comparison between the projected Cash Flow Statement/Cash budget and the actual
one and the measures to be taken accordingly.

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 SELECTION OF THE ORGANIZATION
Foods, Fats and Fertilizers Ltd, Tadepalligudem are a family owned
Organization. It is well known as “foods, fats”. But the West Godavari farmers call it
is a “Tavudu Factory”. This organization is professionally carrying the business
activity by the Goenka family. It is having branches in Madras, Bombay, Hyderabad,
Kakinada, Calcutta and Baroda.

Being an optimist, he transformed the adversity into opportunity by this got

and determination. After brief spell in his native land in Rajastan, his restless
enterprising zeal brought, Mr. Goenka to madras in 1943 where he is with his
brothers, started export of handloom fabrics. In due course he established a large
textile business.

In 1959 Mr. Goenka read in a article by Dr. Raghunath Prasad of central and
visited Burma with him to study the relevant technologies though he found that east
German technology better, he was not fully satisfied and asked his brother Ms G.S.
Goenka who was in Japan to study in detail about the Japanese process and another
brother Mr. S.N. Goenka in Europe, to study the process of Hugo of Germany and Dr.
Smith of Belgium mean while he concerned searching for an ideal location to set up
his industry in India. Technology was selected and Tadepalligudem, the rice bowl of
A.P. was finalized as the location for the proposed extraction plant, the first in India to
process rice bran.

This group associates modesty garments and golden needle apparels in

garments and fabrics and Sanyak Udyog in plastic products constantly strengthen
their group activities.

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 NEED FOR THE STUDY

The basic need is to complete a project work for the partial fulfillment
of my master’s degree. With this need, the search started for the topic that was
appealing and that would make most of my skills and abilities.

I carry out the project work in 3F Industries Limited and the aim of the
project is to analyze the cash flow position of the company.

The cash flow analysis has emerged as the principal technique of the
analysis of financial statement. The cash flow analysis can be used with other
measure to fully evaluate the operational efficiency and also provide a standard of
comparison at a point of time and allows comparison with other firms. It can be
used to analyze financial position to identify the trends, shift in trends or other
factors.

For the purpose of the study, 3F Industries Limited is chosen. It is

necessary to identify the financial strengths and weakness of 3F Industries
Limited by establishing relationship between different items of reference.

The present study is entitled financial performance of 3F Industries

Limited by using cash flow analysis. This study is made with special emphasis on
financial position by using cash flow analysis.

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 SCOPE OF THE STUDY

The Present study is undertaken mainly to analyze the financial performance of 3F

Industries Limited during period 2013-2014 to 2017-2018.The Cash flow analysis has
been used for the study. The study is confined to look over the inflows and outflows
of the company.

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 OBJECTIVES OF THE STUDY

The main objectives of the study is to analyze the overall financial position of
the company from 2013-2018.

 To study the organizational structure of the paper industry in general and 3F

Industries Limited in particular.
 To examine raw material requirements in accordance with its utilization
capacity in 3F Industries Limited.
 To analysis the financial structure together with fixed and working capital
functional relationship in the growth of 3F Industries Limited.,
 To study the production, together with capital problems encountered by the 3F
Industries Limited.,
 To give suggestions for improvement on the relevant aspects.

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 METHODOLOGY OF THE STUDY

In the systematic and scientific study of any research work the methodology is very
important, because it deals with the choice of selecting the sample, research work
design, data to be collected and technique to be used for the collection and analysis of
data.In this study the data was collected from two important sources like primary data
and secondary data.
The study is made through two sources:
 PRIMARY DATA
 SECONDARY DATA

1) Primary data:
Primary data is nothing but the firsthand information. Primary data either through
observation or through direct communication with respondents is one form and
another through personal interviews.
2) Secondary data:
Secondary data means data that are already available i.e., by refer to the data, which
have already been collected and analyzed by someone else. Secondary data may either
be published data. Usually published data are available in:
 Annual reporters
 Newspapers
 Trade journals
 Reference books
 Magazines,
 Company websites.

The study completely depends upon the secondary data:

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 LIMITATIONS OF THE STUDY

The following are some of the limitations of the study:

 The study is based on the facts and figures provided by the company and
obtained from the company annual reports
 The available information is not much adequate for studying the organization
attitude towards financial management.
 It actually fails to present the net income of a firm for a period since it does
not consider non-cash items which can easily be ascertained by an Income
Statement. It can be used as a supplement to Income Statement.
 Cash flows from operation does not help to assess profitability of a firm since
it neither considers the costs nor revenues.
 It is prepared on the basis of historical cost and, as such, it does not help to
know the future/projected cash flows.
 The data is not available for comparison with other similar firms in the
industry.

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 INDUSTRY PROFILE

In the Indian context, the term ‘Vegetable Oils’ is almost synonymous with
‘Edible Oils’ and land is not used as cooking media. However it is important to keep
this distinction in mind not all Vegetable Oils are Edible - Some including castor oil
are mostly non-edible and some of the edible oils like Ground Nut and Coconut are
finding increasing industrial applications as in cosmetic, soap making etc.

By virtue if they’re high nutritive content, Edible oils from a major source of
nutrition. The body as a vehicle for carrying vitamins requires the fatty acids in Edible
Oils provide oil cakes, which are by-product of the oil extraction process, are
important source of animal nutrition. These can be processed in to Edible flavors,
which are rich in proteins.

Oil seeds occupy an important position as the agriculture map pf and rank
second after food grains as a farm commodity crop. India accounts for a tenth of the
world output of Vegetable Oils and fats. It is the largest producers of Ground Nut,
rapeseed, mustard and sesame, second in respect of castor seeds, third in coconut,
fourth in cotton seed and fifth in line seed.

Our country has a highly developed oil based industry. Providing gainful
employment to nearly 15 million persons besides another half a million engaged in
milling and processing units. It is essential a food-oil industry accounting for four
fifths of the total supply of Vegetable Oils. Soap paints and varnish industries from
the bulk of non-food applications.

In spite of their national importance, production of food grains has been

suffering a negative growth rate all these years. Only during the first plan period, the
Targets set for production were realized after this no impressive achievement was
recorded.

The main contributory factors are twofold, first only marginal land, in rain fed
areas is being used for their cultivation resulting inevitable in low productivity,
second agriculture in India is still subject to the vagaries of monsoon, which makes
for erratic production. It is little wonder therefore that the annual rate; of growth of

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oil-seed production for the decade 1965-1976 was a mere 1.2 percent while that of oil
seed productivity, an equally dismal one percent.

Viewed in the global context, India has the dubious distinction of having the
highest acreage under oil seeds and recording the highest output, and yet showing the
lowest yield, at 736 kg. India’s yield per hectare is lower than that of Nigeria (1615.38
Kg) U.S.A. (91474.58 Kg), Argentina (1153.49 Kg.) and China (1148.55 kg.) The
following table would give picture of Indian’s placing in the world settings.

For the year 1980-81, target for oil-seed production had been fixed at 11
million tones, actual production however lagged behind, with; provisional estimates

Placed at 10.2 million tones. Production of live major oil seeds viz./
groundnut, rare seed mustard, sesame, line seed and castor seed and is estimated to be
around 90 lakes tones, which is about 13 percent higher than the previous year’s
production. Production estimates of groundnut at 57 lake tones however show decline
of 70,000 tones. At 2 lack tones castor seed production has also registered a decrease
of 30,000 tones. Rapeseed, sesame and line seed have however, registered increase
over the previous year’s production levels.

The central Government therefore took various measures to increase

production of oil seeds. A centrally sponsored scheme for an intensive oil seed
development programmed was operated in 14 states with a coverage target 40.6 lakes
hectors under a liberalized pattern of central, assistance. However actual coverage
was only 36 lake hectares and the short fall was attributed to serve drought conditions
in several states during the kharif season.

Short falls in production persisted in the oil year 1981-82 as well. As a result,
domestic industry could not meet the consumption needs respect of edible oils. The
total edible and supplies from indigenous sources were estimated at about 30 lake
tones in 1981-82 (which however higher than the previous year’s levels of 25 lakes
tones). The gap of 10 lake tones had to be filled only through imports. Consequently,
the state-trading corporation was asked to import a million tons of Edible Oils during
the oil year 1981-82. The allotment of imported Edible Oils was also pruned in a bid
to ensure more supplies through fair price shops.

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 The trend of imports in expected to continue in the year to come despite the
best efforts of the union agriculture ministry to raise oil seed output. The genera-based
international trade center has projected import f 13 million tons of Vegetable Oils in
1985. As for exports, it is anticipated that India would export 15 Lake Tones of oil
equivalent of handpicked-selected groundnut, other nuts and castor oil by 1985.

The composition of our exports is expected to undergo a change palm oil and
products (palm oil and FBD palm oil) will in further account for an increasing share
of Indian exports soybean oil and rapeseed oil will continue to be imported through
their combined share may fall to about one third of the total imports refined rapeseeds
oil could be the cheap oil for the liquid market while soybean oil is expected to the
supplied to the vanaspathi industry. Regarding production of oils, an increase in the
production of solvent extracted oils such as rice bran oil tree oils in lightly to occur
the ITC reports says that the country could make significant investments in view of
it’s resource for this oil and the demand for Edible Oils. The report has also forecast a
rise in the de oiling of groundnuts cake and other sun cakes the country could also
produce 4.5 lakes of tones seed oil per year.

PROFILE OF THE OIL INDUSTRY:

The power and strength of the company depends on how strong and secure it is on the
food front. In trying to achieve this goal, the oil seed scenario in the country has
undergone a substantial charge during the past few years. The country is moving away
from a situation of scarcity and huge import bills to one of self-sufficiency and
possibly even export of vegetable oils.

India ranks high among the oil seeds producing countries in the world with perhaps
the largest number of commercial varieties of oil seeds such as ground not, rape and
mustard, sesame, kardi seed, nigerseed, soya beans, sunflower seeds, linseed, castor
seed, copra, cotton seed and a number of minor seeds of tree origin oil seeds takes
their place, as the second largest agricultural crop, next only to food grains. The
cultivation of oil seeds in India is spread over various states with a distinct regional

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pattern covering about 19 to 20 million hectares, which accounts for about 11 percent
of the total land under cultivation in the country.

In India where fats of animal origin such as fish oil are seldom used as cooking
media. The term “vegetable oils” is used as a synonym for “edible oils”. However, it
needs to be recommended that there are, on the one hand vegetables oils such as
castor, groundnut and coconut oils, which are finding increasing. Industrial
applications such as in cosmetics, soap making etc… edible oils are a major source of
nutrition for the people in the country. Oil cakes that are by-products of the oil
extraction process are an important source of animal nutrition. They can also be
processed in to protein rich edible.

India has a highly developed oil based industry employing more than 15millon
persons. However, it remains essentially food oil. The industry is accounting for as
much as 83% of the total supply of vegetable oil in the country. The major non-food
users of oil are soap, paint and varnish industries.
Faced with major demand for their conventional products, FMCG majors have been
planning their hopes on branded staple foods to deliver rapid top line extension.
Negative growth in the oils and fats business has been instruments in restraining top
line growth for the FMCG.

PRODUCTS:
Broadly, edible oil or fat products can be categorized as fallows.
a. Vegetable refined oil
b. Hydrogenated oil
c. Bakery fats
Expelled ground oil of good quality can be directly consumed. It can also be refined
to have higher purity other oils such as soya has to be refined to make them edible.

Vanaspathi is obtained by hydrogenation of edible oil. It is used as a suitable for ghee

by some segments of sources and also for making sweets, snacks including biscuits,
cakes etc…

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CONSUMER AWARENESS AND PENETRATION:

Among FMCG products, edible oils has one of the highest penetration of 98% in
urban as well as in rural areas penetration of all these 3 cooking medium is very high
at 99.8% in urban areas as well as rural areas.

Vanaspathi penetration averages 17.4% at all India level, significantly higher at

28.8% in urban areas and 13% in rural areas. It is highest in medium size towns of
0.5-1mm population of 34.3% in metros and towns.
In metros refined edible oil is a relatively popular cooking medium. The per capita
vegetables oil consumption in the country was 7.6kg p.a in 1997-98, significantly
lower than 8.5 kg p.a during 1996-97.

CONSUMER HABITS AND PRACTICES:

Edible oil is one form or other is consumed is almost every household, and
Indian food habits show a strong preference for fried vegetables and several other
fixed snacks.

Traditionally the north and west have been milk surplus regions in the
country. This has led to surplus ghee production in these areas and higher ghee
consumption. The lower ends of the society, which cannot afford ghee, consume
vanaspathi.

Sweetmeat makers in the unorganized sector, particularly in the north

represent one of the largest user segments for vanaspathi.

In the south there has been abundant availability of edible oils, namely
coconut oil, ground nut oil, sunflower oil etc. This had led to different consumer
habits southern consumer prefer refined oil cooking medium as compared to ghee or
vanaspathi. Similarly the eastern region, which is milk deficient, has preference for
vegetable oil as cooking medium.

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 There are also regional and cultural differences in the type of edible oil used
for cooking. For instance kerala uses more of coconut oil for cooking. Sesame oil is
widely used in the north, mustard oil in the north and east while there is an over
whelming preference for groundnut oil is in the west.

Most consumers, especially in the rural areas buy edible oil in loose form.
Where as in large metros loose oil is scarcely available as retailers find it difficult to
handle the same. In medium sized towns, loose as well as branded oil is available.

In the last few years popularity of branded oil has been increasing particularly with
the introduction of low cost poly packs with the government ordering compulsory
packaging of edible oil in the wake of dropsy deaths in the country due to use of
adulterated mustard oil, the wage of branded oils is expected to witness phenomenal
growth.

India accounts for 9.3% of world oil seed production. It has the world’s fourth largest
edible oil economy. In 1999, India ranked as the world’s largest importer of edible
oils, displacing china. The bulk of edible oil, India imports under the open general
license is RBD palmolein of Malaysian and Indonesian origin.

India is one of the worlds leading producer of oil seeds and oil, contributing to 9.3%
world oil seed production. It produces the largest number of commercial varieties of
oil seeds over nearly 28.4 million hectares of land. The major edible oils produced in
India are ground nut, rapeseed, soya, cottonseed, sesame seed, castor seed, sunflower
seed, etc. Groundnut was the most widely consumed and traded edible oil determining
edible oil economics, but is now being displaced by others. India is the world’s
second largest production of groundnut, next only to china. The govt. has set up a
technology mission on oil seeds, to increase production of other oil seeds and oil and
to reduce dependence on imports.

The strategy followed was to

 Increase productivity with better inputs and practices
 Increase area under oil seed crop

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  Encourage winter oil seed crops.

This led to a sharp increase in oil seed production driven mainly by rapeseed,
sunflower, castor seed and soya. India is today the world’s third largest producer of
rapeseed and cottonseed and the largest producer of caster seed.

India has approximately 300 edible oil refining units, 60-70% of which are in the
small scale unlike the bigger refiners, the smaller one are unable to important huge
quantities of crude either low capacity or lack of financial resources, and may be
forced to close down or sell out to the bigger ones in the fore cable future.

Another major problem is the low capacity utilization. The installed capacity of oil
mills is around 36 million tones annually, but capacity utilization is only 40% solvent
extraction plants shows only 33% capacity utilization of vegetable oil refineries 40%
utilization.

The import of refined palm oil was put under OGC (Open general license) in March
1994. Other edible oils were put under OGC in April 1995 when an item is brought
under OGC, it means that the item can be imported without seeking any approval.

Originally there was no discrimination between refined and non-refined edible oil as
far as import duty was concerned. The duty on both was 65% duty was then slashed to
30% for both then to 20% in 1996 and 15 % in the 1999-2000 budgets.

In most parts of the world, import duty on the oil seeds is lower than that on oils. But
in India, it is higher 40%. That is why no import of oil seeds (or) oil-bearing material
has taken place in India. The industry wants the duty to be lowered from the present
40% to 50%.
Edible oil prices in the Indian market have crashed owe to large imports by
multinational trading houses. The edible oil industry is one sector in India that will
see considerable reform in the foreseeable future.

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Major players in refined edible oils in the organizational sector are the ITC Agrotech,
Marico Industries, Ahmed mills, Godrej foods. HLL and NDDB. The market is highly
fragmented among various brands. Sundrop refined Sunflower oil brand with around
13l market share/ ITC Agrotechs other edible oil brands include Real Gold mustard
oil, Crystal refined oil and Sudan unrefined mustard oil. Sweekar sunflower oil
marketed by marica has an 8.2% share and saffola has 7.5% market share other
leading edible oil brands include NDDB’s Dhara rape seed oil. Godrej foods (Godrej
cooklite sunflower) with 11% market share, HLL’s flora with 2.5% market share (6%
in sunflower oil segment) and Postman with around 8% market share.

The vanaspathi HLL’s Dalda is the oldest and largest brand with close to 36% market
share. Its brand extension Dalda manpasand was launched in 1996. In Feb 98, HLL
launched another brand variant dalda feel light. Other major vanaspathi manufacturers
are Wipro, Amrit Vanaspathi, IVP, Madhusudan industries Rasui and Pioneer Agro.

IMPORT OF EDIBLE OILS:

It has not been done away completely, but whenever import is now made is largely a
measure of precaution than out of any composition from 1988-89. The edible oils
import has been drastically cut down/ In 1996-97, import totaled 3 lakh tones valued
at Rs 250 crores during the next 2 years it is expected around the same level. The
present import is significant compared to the napping to 19.45 lakh tones imported
value at Rs 969 crore in 1997-98.

India has signed a memorandum of understanding with Malaysia for an annual import
of two lakh tones of palm oil for two years. Besides the country is to receive 50,000
tones of soya been oil from the U.S. as a gift for meeting social objectives.
Although in the context of exceptionally large oil seeds production during the current
year, there is hardly and need for import, the country may avail the option to import
for building a buffer stock to meet the needs of public distribution system during the
lean period.

‘EXPORT

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Export of oil mill, oil seed and minor oils and are expected to gather momentum
following the enouncement regarding the full float of rupee on the trade account,
according to the sources in the trade. The present export scenario shows that the trade
is in a beyond mood of achieving a formidable target, with increased export earning in
the current year. This basically enacts from bumper oil seeds output of 215 lakh tones
in the offing. This expectation of a bumper crop, moreover has compelled the union
ministry of commerce to raise the current years export target for the oil seeds from Rs
1250 crore over Rs 1300 crore.

According to the estimates made by the central coordination committee, the exports of
oil mills, oil seeds and minor oils during the current year would be more than 3.3 lakh
tones with a value of Rs 1362 crore as against 30 lakhs tones with the value of Rs
1043 crore achieved during the year 1996-97 the export of oil meals, oil seeds and
minor oil during the period April 1996 to Jan 1998 stood at over 24 lakhs tones valued
at more than Rs 1000 crores.

CUSTOMER SATISFACTION:

Satisfaction is a person’s feeling of pleasure (or) disappointment resulting from

comparing a products perceived performance in relation to his (or) her expectation.

As this definition makes clear satisfaction is a junction of perceived performance and

expectations. If the performance falls short of expectation, the customer is
dissatisfied. If the performance matches the expectations, the customer is satisfied or
delighted.

Many companies are aiming for high satisfaction because customers who are just
satisfied still find it easy to retain.

When a better offer comes along those who are highly satisfied are much less ready to
switch. High satisfaction (or) delight creates an emotional affinity with the brand, not
just a rational preference. The request is high customer loyalty.

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 COMPANY PROFILE
FOODS FATS & FERTILIZERS LIMITED
Introduction:

Foods, Fats and Fertilizers Ltd, Tadepalligudem are a family owned

Organization. It is well known as “foods, fats”. But the West Godavari farmers call it
is a “Tavudu Factory”. This organization is professionally carrying the business
activity by the Goenka family. It is having branches in Madras, Bombay, Hyderabad,
Kakinada, Calcutta and Baroda.
The registered office of Foods, Fats and Fertilizers:
P.B.NO-15
Tanuku road,
Tadepalligudem-534101
West Godavari district
Andhra Pradesh.
Foods, Fats and Fertilizers Ltd, Tadepalligudem, West Godavari district was
conceived in 1959, born in 1960 and was on its feet by 1962. Today foods, fats and
fertilizers Ltd has matured into a conglomeration of 20 industrial units spread over 40
acres constantly buzzing with activity and providing employment to over 630 persons.

MISSION:
Safety and quality are the wings of our success.

VISION:
To be the number one edible oils and speciality Fats Company in the country
targeting to reach 1000 crores people by 2008.

PHILOSOPHY OF THE COMPANY:

The philosophy of the organization 3F is “serving the society through the

industry”.

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OBJECTIVES OF 3F LTD:

The main objectives of the organization are:

 To serve the society through the success in the oil output.

 The objective towards the organization include –
 Concern
 Commitment
 Integrity
 Quality
Foods, Fats and Fertilizers have completed 40 years of existence where it has seen
lots of ups and downs.
As the company has incorporated its name as Foods, Fats and Fertilizers Ltd,
it has given 3F as the brand name to all the products it produces. The wheel of the
fortune has turned a full circle for Mr. B.K.Goenka, the architect of Foods, Fats and
Fertilizers Ltd. Born and Bred in Burma the Goenka family established and respected
in industry and trade.

They had a flourishing textile business and a large rice mill. The rice bran
from Mr. Goenka’s mill was avidly sought as animal feed and his observant eyes used
to notice thin deposit of oil in the wrapping papers used for sampling could this oil be
extracted? What would be its quality? These questions had to wait because in 1942
the Japanese invaded Burma and Mr. Goenka had to abandon his business and return
to India.

Being an optimist, he transformed the adversity into opportunity by this got

and determination. After brief spell in his native land in Rajastan, his restless
enterprising zeal brought, Mr. Goenka to madras in 1943 where he is with his
brothers, started export of handloom fabrics. In due course he established a large
textile business.

In 1959 Mr. Goenka read in a article by Dr. Raghunath Prasad of central and
visited Burma with him to study the relevant technologies though he found that east
German technology better, he was not fully satisfied and asked his brother Ms G.S.

23
Goenka who was in Japan to study in detail about the Japanese process and another
brother Mr. S.N. Goenka in Europe, to study the process of Hugo of Germany and Dr.
Smith of Belgium mean while he concerned searching for an ideal location to set up
his industry in India. Technology was selected and Tadepalligudem, the rice bowl of
A.P. was finalized as the location for the proposed extraction plant, the first in India to
process rice bran.

This group associates modesty garments and golden needle apparels in

garments and fabrics and Sanyak Udyog in plastic products constantly strengthen
their group activities.

A NEW ERA BEGINS:-

In collaboration with M/S Yoshino seisakusho company Ltd, a renowned
engineering house in Japan we leshered in a unique technology for refining high FFA.
Rice bran oil to induce large production of rice bran oil by providing diversified
outlets and better realization to the solvent extraction plants to achieve the potential
production of 0.6 million toNnes from the present 0.25 million tones and almost
nothing in 1960.

FUNCTIONAL PROFILE:-

PRODUCTION: VARIOUS PLANTS IN FOODS FATS AND FERTILIZERS

LTD:-
Solvent Extraction:- (Lurgi, West Germany)
Installed and commissioned in 1962 with production capacity 2400 tones pa.
This plant process is exclusively for rice bran. Rice bran is tempered and palletized by
the use of hexane, the oil in the bran is extracted. The de oiled bran thus obtained is
packed for export. According to the quality of the oil is extracted is used for edible
and non-edible purposes.

Solvent extraction Plant II:- ( desment, Belgium, India)

24
 Installed and commission in 1972 production capacity 36000 tones PA
process. In thus plant is similar to plant-I however this plant is equipped with
preparatory.

Solvent- extraction plant III:-

Installed and commissioned in 1983 production capacity 45,000 tones pa. (
Fabricated and installed by engineering division of foods, fats and fertilizers Ltd).
This plant is also versatile to process various seeds oiled cakes and kernels. It is
designed, fabricated by foods, fats and fertilizers Ltd, engineering division short
coming of the other plant.
Its uniqueness is the incorporation of minimize the Hexane loss and facility for low
temperature extraction.

Refinery:-
Installed and commissioned in 1965 production capacity of 4500 tones p.a.
Our refinery is equipped with both batch and continuous neutralizes. Refining process
consists of benumbing, caustic neutralization, Bleaching and deodorization.
Deodarised oil is passed through polishing filters and sent to packing section.

Solvent extraction plant (iv):-

(Fabricated and installed by oil ex India and their engineering division)
It was installed and commissioned in 1985 with a production capacity of
45000 tons per annum. These four extraction plants provide variability of operation in
oil seeds and oil cakes and at the same time has advantages in marketing. The plants
have facilities to process a wide varieties of oil seeds, oil cakes like rice bran,
soybean, sunflower, ground nut, rape seed, sesame, mangosal, Niger etc.,
Due to non-availability of sufficient bran and export-import policies of Indian
government, forced the company to stop two solvent plants.

Fat Splitting plant:-

Installed and commissioned in 1967 into a production capacity of 4500 tones
pa. Oil consists of fatty acids and glycerin. It can be separated from the oil by high

25
pressure splitting under high pressure and temperature, reaction taxes place, slitting
the oil into crude fatty acid and sweet water which is the dilute from the glycerin is
obtained.

Glycerin plant:-
UNIT NO: 1 installed and commissioned in 1967 with a production capacity
of 300 tons per annum. Sweet water obtains from the fat splitting plant is set to multi
effect vacuum evaporators, where it is evaporated into crude glycerin. The crude
glycerin is further concentrated, deodorized and bleached to yield refined glycerin.

Hydrogenation plant:-
UNIT NO: 1 commissioned in 1979, UNIT NO 2 in 1982 into a production
capacity of 6000 tons per annum. Rice bran oil bounds in unsaturated fatty acids to
render this oil suitable for making good quality soaps it has to be hydrogenated for
increasing its melting point. Hydrogenated plants consists of cell house, compressor
room and hydrogenation auto claves. This oil is hydrogenated under high temperature
and pressure using a catalyst.
To obtain better products for premium soaps this hydrogenated rice bran oil is split
and distilled to give hardened distilled fatty acid.

Physical Refinery:-
Installed in 1986, into production capacity of 9000 tons per annum. This is
fabricated by the engineering division of foods, fats and fertilizers Ltd. The
conventional process of refining consists of specifying the free fatty acid in the oil by
the use of an alga. In physical refining the free fatty acid is directly distilled out under
high vacuum and temperature.

Waste oil recovery plant:-

Installed and commissioned in 1986. In this plant waste oil from present
bleaching earth and spent nickel catalyst is recovered.

26
Vanaspathi Shortening:-
Production of Vanaspathi shortening high quality bakery fats, margarine from
refined oils fractionation. This division produces high quality olives and steering
from various edible fats for use in manufacture of chocolate confectionery and
cosmetics leading manufacturers this yields of activity all over the world are their
consumers.
Turnkey Engineering:-
In collaboration with yashino-seisakush co. Ltd. Japan who has done
pioneering work in developing process and technical know how far refining high fat
rice bran oil. The engineering division has installed and commissioned five plants into
a total project cost of Rs 1.70 millions in south India.
India is the second largest producers of rice and has large potentials for crude rice
bran oil to be processed and turned into a cooking medium to satisfy their
requirements of an immense Indian market.

International Trading:-
Besides the export of the manufactured products, with large ware houses for
dry cargo, bulk storage installation for liquid infrastructures at their command and the
rich international trading experience of over 40 years. They have set up high standards
and achieved substantial growth is international trading of commodities like rice,
industrial fats, maize, tapioca, HPS ground nuts, kernels, oils and chemicals, new
products like natural foods, cob’s, oleoresin and high quality waxes are proposed to
be added to their export baskets.
Through R&D new products and value addition to the existing products is being done
in a continuous basis for enriching the international trading both quality and volume.

ADMINISTRATION AND ORGANIZATIONAL STRUCTURE

Board of Directors:
 Sri B.K.Goenka (Chairman and M.D.)
 G.S.Goenka (whole time Director)
 S.B.Goneka (whole time Director)

27
  Bharat Kumar Goenka (whole time Director)
 O.P.Goneka
 Sita Ram Goenka.
 Sushi Goenka
Organizational structure:
The General Manager is the main administrating and controlling and head of
the 3F ltd. On behalf of the board of directors under him there will be one Deputy
(Finance and Administration) five heads of the Departments representing the 3F ltd.

Man Power Position:-

To continue the day by day operations the company has adopted a systematic
manpower poison.
1) Managerial Staff:
The managerial staff consists of 75 members and they belong to all
departments of the organization.
2) Staff:
Staff consists of 100 members. It includes clerical and non-clerical staff.
3) Technical Staff:
The technical staff consists of 245 members. It includes plant engineers, plant
supervisor, plant operators etc.
4) Bata:
Bata otherwise known as piece rated workers, they are 92 in number.

5) Trainers:
Trainers consist of 98 members. Trainers are those persons who take training
from the organization.
6) Act apprentices:
An act apprentice consists of 20 members. Industrial training colleges send
some students to the organization to pursue trainings in different branches.

28
MARKETING:-
The 3F ltd has a strong marketing network spread in all the country where it is
existed. Various dealers and consignment agents are been appointed every year to
increase the network and have a strong command over the market. The company has
also increased the size of the basket of the products that are offered to the industrial
customers by adding various new products.
FINANCIAL RESULTS:-

Financial performance:

During the years 2002-2003 and 2001-2002, the company was mainly engaged
in trading of imported vegetable oils and achieved a turnover of Rs 279.17 crores as
compared to Rs 327.25 crores previous year.

After that in the year 2003-2004 the turnover is Rs 285.66 crores the
decrement is due to Govt. policies imposed lower customs duty on raw oils. Further
export impressive with resumption of rice and other agri-product exports. The
increase in export performance is due to enhanced manufacturing export from
Rs.7.87 crores to Rs.19.13 crores .

YEAR EXPORTS (Crores)

2016-2015 56.28
2015-2014 61.32
2014-2013 41.65
2013-2012 43.31
AWARDS:-
The company received the “SEA RICE BRAN OIL” award in 2001-2002 from the
solvent, extraction association of India.

PROJECTS:-
2000-2001, a terminal at Gopalpur in orissa was commissioned and started
marketing imported oils in the linter lands of orissa.2001-2002 palm, solvent, refining
and purification of plant.

29
 2002-2003, Balancing of equipment has been by adding a cooling tower to
various plants.2003-2004,Complete Deodourisation plant III has been commissioned
with installed capacity of 18000 TPA in order to improve the productivity.
MANUFACTURE OF QUALITY PRODUCTS:
1. Tandul (Rice Bran Oil)
2. Surabhi (Vanaspathi)
3. Bakers pet (Bakery shortening)
4. FOODS, FATS & FERTILIZERS (Vanaspathi)
5. Mello (Margarine)
6. Mellocreme (Margarine)
7. Biscreme (Aerated Shortening)
8. Palmdelite
9. Goldenspread (Margarine)
10. 3F Sunflower
11. Royal Delight
12. Trim.

Tandul
Premium quality refined Ricebran Oil
Packing: 1 ltr x 10 pouches, 2 ltr can, 5 ltr can, 15 ltr can, 15
kg tin.
Visit website www.heartoil.com

Surabhi
Refined Rice bran Oil
Packing: 15 kg tin

Bakerspet (bakery shortening)

Application: A general purpose frying and cooking medium
used by the baker. Bakerspet also finds its application in the

30
confectionery products.
Packing: 15kg BIB, 15kg tins

3F Vanaspati
Application: A granular all purpose cooking medium.
Packing: 200ml, 500ml 1ltr pouches and 15kg tin

Mello (Margarine)
Application: for voluminous and soft cakes, pastries and plum
cakes.
Packing: 15kg BIB & plastic buckets

Mellocreme (Margarine)
Application: used as filling cream and for cake icings.
Packing:15kg BIB

Biscreme (Aerated Bakery Shortening)

Application: A special product for cookies and the creamy-
centres of biscuits.
Packing: 14kg BIB

31
Palmdelite
Refined Palm Olein.
Packing: 1 ltr x 15 pouches per carton, 15 kg tin.

Goldenspread (Margarine)
Application: a very popular brand for crispy & flaky puffs and
kharis.
Packing: Oil 15kg BIB

3F Sunflower
Packing: 1 ltr pouch x 10, 1 ltr x 20 pouches per carton.

Royaldelite
Premium quality Refined Palm Olein
Packing: 1 Ltr x 15 pouches per carton, 15 kg tin.

Trim
Application: General purpose cooking fat especially for
parathas & biryani.
Packing: 15kg BIB

32
 13.

This product is derived from vegetable oils like Palm Fatty Acid Distillate, Rice Bran
Oil, Rice Bran Acid Oil and Crude Palm Stearine. We also manufacture tailor-made
stearic acid to suit customer's specification.

Application:
This product is used in various industrial applications like cosmetics, metallic
stearates, PVC Resin Pipes, Rubber, Metal Polishing, Plastics, Cement Paints, Water
proofing Cements, Tyre Sector etc.

Packing:
In flake form, packed in 50kg HDPE woven bags.

International Trading:-
Besides the export of the manufactured products, with large ware houses for
dry cargo, bulk storage installation for liquid infrastructures at their command and the
rich international trading experience of over 40 years.
They have set up high standards and achieved substantial growth is international
trading of commodities like rice, industrial fats, maize, tapioca, HPS ground nuts,
kernels, oils and chemicals, new products like natural foods, cob’s, oleoresin and high
quality waxes are proposed to be added to their export baskets. Through R&D new
products and value addition to the existing products is being done in a continuous
basis for enriching the international trading both quality and volume.

Organizational structure:

The General Manager is the main administrating and controlling and head of the 3F
ltd. On behalf of the board of directors under him there will be one Deputy (Finance
and Administration) five heads of the Departments representing the 3F ltd.

33
 Organisation chart

Director

G.M G.M Commercial Sales Stores Production Manage ADM

(Finance) (H.R.D) manager manager officers manager r Engg manager

Deputy Personal Commercial Marketing Purchas Manager Maintenance Administration

officer engineer
Manage officer manager e Refineries
r Officer officer

Assistance Welfare Commercial Sales Stores Deputy Mainten Office

manager Manage assistance Represe assistanc Manage ance LASO
r ntative e r engineer IV
boiler

Junior Security Sales Junior Junior Junior Supervi

executive officer assistant stores plant engineer sion &
accountant s officer officer administ
rator

Accountant Time Plant

officer operator

34
Man Power Position:-
To continue the day by day operations the company has adopted a systematic
manpower poison.
1) Managerial Staff:
The managerial staffs consist of 75 members and they belong to all
departments of the organization.
2) Staff:
Staffs consist of 100 members. It includes clerical and non-clerical staff.
3) Technical Staff:
The technical staffs consist of 245 members. It includes plant engineers, plant
supervisor, plant operators etc.
4) Bata:
Bata otherwise known as piece rated workers, they are 92 in number.
5) Trainers:
Trainers consist of 98 members. Trainers are those persons who take training
from the organization.

6) Act apprentices:
An act apprentice consists of 20 members. Industrial training colleges send
some students to the organization to pursue trainings in different branches.
MARKETING:-
The 3F ltd has a strong marketing network spread in all the country where it is
existed. Various dealers and consignment agents are been appointed every year to
increase the network and have a strong command over the market. The company has
also increased the size of the basket of the products that are offered to the industrial
customers by adding various new products.
Capital sources:
 Sales include garments (inclusive of transportation) Rs 171.23 lacs.
 Sales are stated at gross value inclusive of taxes and freight.
 Investment subsidy 20% of fixed capital investment subject to a selling of
Rs2million.

35
  Power subsidy 25% rebate in power bills for a period of 3years subject to a
limit of Rs 5million.
 Capital reserve represents the amount of principle waiver by the bank and
financial institutions.
 Other receipts includes Rs 3.45 lacs being difference of sale value of mould Rs
14 lacs over its purchase value Rs 10.55 lacs made during the year.
 The amount shown in balance sheet, profit loss accounts are not strictly
comparable with previous year due to demerger of the company in the
previous year as the turnover and expenses of resulting company up to 30-09-
2008 are included in the financial statements.

Bankers :
 State bank of India (Chennai)
 State bank of Hyderabad (Chennai)
 Andhra bank (Tadepalligudem)
 Central bank of India (Chennai)
 Industrial development bank of India (Chennai)
 Karur vysya bank ltd (tadepalligudem)
Capital Structure:

The company is a closely held industrial house (with no public investment)

following is the capital structure as 31-3-09.
Particulars Rs crores

Share capital(including reserves) 74.92

Loaned funds(secured loans) 109.34

Unsecured loans 29.93

Deferred tax 1.84

TOTAL 228.03

SWOT Analysis: The swot analysis provides information that is helpful in

matching the firm’s resources and capabilities to the competitive environment in
which it operates. As such, it is instrumental in strategy formulation and selection. A

36
scan of the internal and external environment is an important part of the strategic
planning process environmental factors internal to the form usually can be classified
as strengths(s) and weaknesses (w) and those external to the firm can be classified as
opportunities (o) and threats(t) such as analysis of the strategic environment is
referred to as a swot analysis.
Strengths of 3F:
Strengths are the company’s resources which help to attain the objectives of
the company
 It has efficient management which takes effective decisions.
 Well trained and disciplined work force.
 Plant location which is proximity to labour, raw material, and transportation.
 H.R.policy of the company which is concentrated on enhancing productivity
and result oriented performances.
 It has 3F as a brand name, which is a valuable intangible asset.
 Will positioned in attractive market segments
 It has adopting the latest technology
 Strong financial condition ample financial resources to develop the business.

Weaknesses of 3F:
A weakness is limitation is deficiency in resources skills and capabilities that
seriously in speeds effective performance. Coming to the company side it has no
weaknesses. Particularly but some challenges are there. In front of the company there
are as follow.
 Under utilization of capacity.
 Too much debt.
 High cost structure.
 A weak brand name.
 Lack of quality raw material.

Opportunities of 3F:
The 3F also has key opportunities there are.
 Falling trades barriers in attractive foreign markets.
 Expanding the company’s product line.
 High market share of the company.
 Openings to exploit new technologies.

37
  The 3F has subsidiary companies like
i. Arker international Ltd, Singapore
ii. Eylon speciality fats pvt Ltd, Srilanka
iii. Ghana Ltd, Ghana, west Africa.
 Ability to grow rapidly because of sharply rising buyer demand for the
industries product.

Threats of 3F:
 Increasing intensity of competition among industry competitors may squeeze
profit margin.
 Changes in buyer’s tastes and preferences away from the industry’s product.
 Shortage to supply of raw materials due to natural calamities.

38
 REVIEW OF LITERATURE
Introduction:
The format of a review of literature may vary from discipline to
discipline and from assignment to assignment. A review may be a self-contained unit
an end in itself or as preface to and rationale for engaging in primary research. A
review is a required part of grant and research proposals and often a chapter in thesis
and dissertations.
The purpose of a review is to analyze critically a segment of a
published body of knowledge through summary, classification, and comparison of
prior research studies, reviews of literature, and theoretical articles. The main
objective to achieve in the literature review is developing knowledge and
understanding of the previous work or activity in regard to the topic being researched.
The literature review also addresses the importance and need to inform the
investigator as to the main findings, trends, area of debate or controversy, area of
neglect and suggestions research. 2 There are hundred books and papers about cash
flow and accrual accounting but there are few books and papers about both the topic
together. In this chapter, researcher has tried to collect data from research papers,
theses and books related to this study. The goal of this chapter is to collect the
literature review by considering the key theoretical issues related to the research
proposal. That means using accrual accounting and cash flow data in predicting future
cash flow and to present models of cash flow prediction. This chapter constitutes of
two parts viz. review of literature and research gap. The first part is related to review
of literature and second part is based on the critical evaluation of review and research
gap.
Ball and Brown et al (1968):
They have searched the relationship between accounting earnings and
stock price and suggested that earning have an implication for future cash flows of
companies.

Ashton et al (1974):
Suggested that accounting information from financial statements is
useful in predicting future cash flow of a company. Consequently, the usefulness of
accounting information has been investigated in terms of their ability to predict future
cash flows.
39
FASB (1978):
The important of cash flow prediction is supported by statement of
accounting standard. Both the Financial Accounting Standard Board (FASB) and the
International Accounting Standard Committee (IASC) provided a fundamental
guideline for preparing and presenting financial statements, that the objective of
reporting financial statements is to provide financial information for users to predict
the amount, timing and uncertainty of the future cash flow of a company. The primary
objective of accounting data is to provide information to help present and potential
investors; creditors and other things like assess the amount, timing and uncertainty of
prospective net cash inflows to the related enterprise.
Khumawwala, Polhemus and liao(1980)
Developed prediction models of future cash flow by using the Box- Jenkins
methodology and compared the model with other five models. The competitive
models are as below: Naïve models: aptew of the value of cash flows at first, second,
third, And fourteenth quarters. Their study focused on the airline industry, using
quarterly data for the period 1965 to 1976 obtained from the Air Carrier Financial
Statistics. The sample contained twenty-nine firms. The prediction models were built
for individual firms and each category of operation.
Gombola and Ketz (1983)
Discussed many new cash flow ratios in recent professional business literature or used
in financial statements in countries were the Chapter II: Review of Literature 24 cash
flow statement is mandatory. To date, no comprehensive set of cash flow ratios has
been agreed upon for the evaluation of the cash flow statement. Different users may
employ different financial ratios even when used for the same purpose. When
different financial ratios are employed, comparison of results is made will be an
unduly complexes.
Greenberg, Johnson and Ramesh (1986)
Claims that earnings are better factor for predicting future cash flows than cash flows.
Many researchers had searched the ability of earnings and cash flows to predict future
cash flows such as the flowing assertion: provided evidence supporting FASB s
statement regarding the importance of earning, They search on their studies to test
empirically whether current earning is better for predicting future cash flow or current
cash flows. They selected 157 industrial companies from the Composted database for
the period from1963 to 1982 which was used in their study. The operating cash flow
40
variable used in this study which was approximated by indirectly adjusting earning for
non cash items and changes in current assets and current liabilities (excluding the
current portion of long term debt). The average or liner relationship between each
company’s current cash flow and its previous cash flow and the average liner
relationship between each company’s current cash flow and its previous earnings
were estimated by using ordinary least- squares regression. Not only models of one
year’s data but also multiyear data, including two and three years were examined.
They reported that current earning have the ability to predict future cash flows better
than current cash flows for each lag period of one to five years and for each multi
lagged period of two or three years.
Gombola et al. (1987)
discussed the balance sheet represents different assets owned by an enterprise and
shows the method in which acquisition at the end of fiscal period but source of them
related to those items during the period not clearer, and profit in income statement has
not any effect on increase in cash. Moreover, the profitability and financing issues are
reported separately on income statements and balance sheet respectively. This causes
misleading and confusing result to users.
Zega (1988)
Represented cash flow statement is a replacement of fund flow statement for two
reasons. First, it gives solutions to the argument of the definition of funds and
objective of represent the fund flow statement. According to him, fund flow statement
shows ideal information for investors and other financial statement user with respect
to use of the form of fund.
Bernard and Stober et al (1989)
argued that earning suffers from flexible accounting techniques, subjective judgment
and manipulative practices, therefore, the statements of financial data from accrual
accounting information process may be misleading, making earning a less reliable
measure of a firms performance.
Murdoch and Krause (1990)
Addressed the terms in their question1, conclusion supported the assertion of FASB
that earnings are a better predictor than Chapter II: Review of Literature 29 cash flow
from operations. In answer to question 2, they found that the current component of
earnings included in the measurement of working capital was a better predictor than
the non current component included in measuring earnings. Finally, they concluded
41
that the accuracy prediction of the model can be improved by utilizing of data of a
long period.
Neil et al (1991)
Forecasting cash flow is a responsibility needed in different economic decision,
because cash flow plays an important role of whole decision making of every party
such as security analysts, creditors and managers. Overall, financial managers and
decision makers predict the demand cash flow of companies because they expect that
current cash flow affect on future cash flows.
Climo, Lawson and Lee (1992)
Suggested with respect to the importance of cash flow prediction, some academics
have advocated revealing cash flow forecasts in order to assist investors and analysts
to predict future dividend streams. They suggested that cash flow forecasts should be
compared with actual cash flow in order to provide more useful information for
investment decisions.

Nurngber (1993)
Recognized cash flow on cash flow statement should be with three factors of
activities for any enterprise such as recognized by (FAS), No. 95 and (IAS7). These
can be a cash flow operation activity and investing and financing activities. The
classification for cash flow statement is driven from finance theory.
Sylvestre and urbanic (1994)
Used financial ratios can be for predict financial variables and to evaluate relative
performance such as predicting bankruptcy, stock prices and the probability of loan
defaults Ratios are developed to help users of financial statements to compare the
performances of companies on year to year basis and across companies.
Plewa and friedlod (1995)
Provided cash flow prediction can help companies to know about cash position and
make its expenditures need for such factor for acquisitions and payment of expenses.
Therefore, difference between future cash flow and actual cash flow is necessary for
analyzing for understanding and measuring a firm’s performance.
Financial Report Standard (FRS) (Revised 1996)
Represented requires reporting entities within its scope to prepare a cash flow
statement in the manner set out in the FRS. Cash flows are increases or decreases in
amounts of cash, and cash is cash in hand and deposits repayable on demand at any
42
qualifying institution less overdrafts from any qualifying institution repayable on
demand. In the past, companies had to show fund flow statement that continues
resources and uses of funds. These funds can categorize in to three types such as, 1)
cash 2) working capital and 3) all resources. Fund shows on fund statements are
reported as working capital that evaluated as current asset minus current liabilities,
while funds presented on cash flow statements refer to cash.
Ingram and Lee (1997)
Indicated that cash flow and income together are useful for evaluation of growth and
growth prospects with implications for the value and survival of business.
Supriyadi (1998)
Studied in the case of Asian countries and the ability of accounting information to
predict future cash flows of Indonesian firms. Regression analysis was used to
construct prediction models. Earnings, cash flows and accounting information were
derived from financial statements. The analysis was performed on both specific firm
and pooled cross sectional year data.
Trotman and Gibbins (1998)
Examined the cost of property, plant and equipment will be written down to expenses
called depreciation based on the period of useful life of them and the methods used.
Realization is the process of changing non cash resources and rights into money. This
concept involves sales of assets for cash or claims of cash. For example, gains from
sales are identified as revenues and losses are identified as expenses.
Obryan, Quirin and Berry (1999)
Discovered many of capital market based research studies have increased, to
investigate the usefulness of cash flow data in decision making.
John Wileyand Sons (2000)
Discovered operating activities in every company are the main activities and include
revenue producing and other activities that are not investing and financing activities.
Investing activities include the acquisition and disposal of long term assets and other
investment except short term investments. Financing activities constitute changing of
result in the size and composition of the equity capital and the borrowing of the
enterprises. The accrual accounting is a basic accounting assumption dealing with the
accounting process of recognizing the effects of financial transactions in the period in
which events occur, rather than focusing only on cash receipts or payment.
Gallinger (2000)
43
Evaluated, cash flow from operations activity can be evaluating the quality of profits
on income statements. The difference between net cash flow from operation and net
profit is the helpful in interpreting the quality of earning. A large difference between
net profits and cash flow from operation will reflect a low quality of profits- perhaps
net income has increased without an increase in cash flows from operations. This may
result from increases in sales on credit causing increases in accounting receivable,
indicating that the company may have a cash collection problem in the future.
Tiron Tudor Assoc. Alexandra Mutiu. ( 2001)
Improved under the accrual method, transactions are counted when the order is made,
the item is delivered, or the services occur, regardless of when the money for them
(receivables) Chapter II: Review of Literature 46 is actually received or paid. In other
words, income is counted when the sale occurs, and expenses are counted when
received the goods or services.
Plewa and Friedlob (2002)
Measured cash flow ratios could be a better measurement for the firms performance
than financial ratios from income statements and balance sheets, because cash flows
from operations as a main component of the ratios, excluding the effect of non cash
flow items such as depreciation expenses and gain or loss on the sale of operating
assets.
Government Accounting Standard Advisory Board (2003)
Suggested by accrual accounting data, Governments will be better positioned to assess
their financial performance and financial position and these data can help in preparing
the position of assets and liabilities of the Government, which is not possible under
other systems
Fleming (2004)
Suggested that the cash flow on revenue ratio and the debt coverage ratio are
considered in analytical procedures to detect financial statement fraud.
Porntip Chotkunakitti (2005)
measured the success of a firm can be measurement by its ability to generate cash,
reporting of cash flow receipts and receipts and payments has timing and matching
problems that cause cash flow to be a noisy measure of firm performance. Since under
the continuing entity assumption, companies are assumed to operate without
discontinuing, in order measuring their performance the companies need to slice time
into small segments and report their progress for each specific period of recording.
44
Companies which record only cash transactions would have problems when the
transaction involves more than one period of recording. This is because companies
usually deal with credit transaction; the report will not show the cost at the time the
business purchased the assets. The incomplete information would give an inaccurate
measurement of the firm’s performance.
Leonie Jooste (2006)
Found that in the cash flow sufficiency ratio showed that the SA industries had
enough cash to pay primary obligations whereas the USA industries did not.
Furthermore, at the levels of cash generated by SA industries the investments in assets
and dividend payouts were more than for US industries. The cash flow generated by
assets used in South Africa is also more than that of the US but US industries retire
long-term debt in shorter period than SA industries.
Larry N. Langemeier Danny Klinefelter and Dean Mccorkle (2007)
Reported data for estimating of cash flow may come from historical records. Such as,
tax returns, and other applicable information you may have. A cash flow forecasting
is made periodically- monthly- bimonthly, quarterly or every year (yearly) and this
type of cash flow forecasting are used on a monthly basis. The annual forecasting
columns have to fill in first, and then only annual forecasting may be allocated to the
various months.
Yoder (2007)
Compared out-of-sample prediction accuracy of regression models for one-year-
ahead CFO. His results indicate that a model including shortterm accrual components
outperforms models using only current CFO as a predictor, but only if the
independent variables are aggregated over three years. Our study differs from the two
mentioned as we use firm-specific estimates, which we expect to produce
significantly lower prediction errors. We also test explicitly whether accruals
contribute more to cash flow prediction as we aggregate the dependent variable and
include market value of equity as our proxy for the highest level of aggregation.
Andrew.
Saeedi and Ghaderi (2007)
Examined the predictive power of book value, net profit, operating cash flow and
investment as representative of accounting information related to market value of
firms. Their results showed that book value and accounting profit were more related
items and considering cash flow (operating and investment) could not increase
45
explanatory power of models significantly. Final results of incomplete cycles usually
can be reliably measured at some point of substantial completion (for example, at the
time of sale, usually meaning delivery) or sometimes earlier in the cycle (for example,
as work proceeds on certain long-term construction-type contracts), so it is usually not
necessary to delay recognition until the point of full completion (for example, until
the receivables have been collected and warranty obligations have been satisfied)
Lambert et al. (2007)
Suggested that firms with more precise information about future cash flows have
lower conditional co variances with the market, and as a consequence, lower
conditional betas and lower expected returns. Overall, the following two-step link is
suggested by the estimation risk literature: 1. firms with higher information quality
have lower forward-looking betas; 2. lower forward-looking betas lead to lower cost
of equity. Note that the forward-looking betas cannot be directly estimated from the
past return realizations.
Gavin Cassar and Ken. S. Cavuzzo and Christopher. D. Ittner (2008)
Suggested accrual accounting data is an important tool in application of new public
management (NPM). Since it could provide a more comprehensive figure of activities
than cash accounting and contribute to improve internal management by providing
full cost information. Most accountants agree the accrual accounting data and it is a
significant position in the private sector financial reporting. By default, accrual
accounting has been used for preparing the financial report of the private sector
companies. They find a little evidence that accrual accounting data has reduced the
likelihood of loan denial after controlling for other factors previously found to be
associated with small business loan decisions. These results are robust to controlling
self selection in the decision to apply for loan and endogeneity in the choice to use
accrual accounting.
Ali Rkein (2008)
Worked in accrual accounting and public sector and his conclusion was, the northern
territory Government introduced on accrual framework for its accounting, budgeting
and reporting into its public sector with the intention that this framework would lead
to an improved performance and accountability. Framework has been developed in
private sector and introduced in public sectors as Governments started to take a more
commercial direction by subjecting public services to competition and market
principle. The study does not mention cash flow and its future prediction in private
46
and public company sectors but my study focuses in accrual accounting and
predicting future cash flow in reality. I have tried to accommodate those subjects
together.
Maria Ogneva (2008)
Found out document that accrual quality is inversely related to the cost of equity
capital. However, found no association between accrual quality and future stock
returns and conclude that there is no evidence that the stock market prices accrual
quality. The researcher hypothesize that Maria Ogneva result arises because poor
accrual quality firms experience negative cash flow shocks in the future, which results
in negative returns that offset the higher expected returns for such firms. Consistent
with this prediction, researcher find a significant negative association between
realized returns and accrual quality after controlling for cash flow shocks, either by
including proxies for future cash flow shocks in asset pricing regressions or by using
an accrual quality measure that is less correlated with future cash flow shocks. This
result is robust to properly specified and standard asset pricing tests. Overall, this
paper adds to the growing literature suggesting that accrual quality is linked to the
cost of capital.
Brochet et al (2008)
Examined to predict future cash flows and the role of cash components and
accounting accrual of profit. They predicted future operating cash flows as well as
market value of equity as dependent variables and found that on average accruals
relative to current operating cash flows improve prediction of future cash flows. They
also reviewed determinants of predictive power of accruals to predict future cash
flows and found that the probability of contribution of positive accruals was more in
predicting future cash flows, contribution of accruals in cash flow volatility increased
and it is reduced in domain of discretionary accruals and special items. Whatever has
been researched about stock returns and value of firm have been mainly variables that
shareholders noticed them and seen from this perspective. While a variable such as
operating cash flow that is calculated based on accounting information to variables
such as accruals that are more based on company policies, is less dependent on
management policies and in this respect is largely immune of management
interference and manipulations. Therefore, this study is trying to determine how much
pricing of stock is affected by specific accounting information such as operating cash
flow. In other words, the relationship between operating cash flow as independent
47
variable and stock price as dependent variable is determined to define that whether
dependent variable can be explained by independent variables.
Dana Hollie and C. S. Agnes Cheng (2008)
Evaluated six cash flow components (which parallel the direct method of the cash
flow statement): cash flows related to sales, cost of goods sold, operating expenses,
interest, taxes, and other. Consistent with our predictions, they find that the cash flow
components from various operating activities persist differentially. They find that
cash related to sales, cost of goods sold, operating expenses and interest persists a
great deal into future cash flows; cash related to other has lower persistence; and cash
related to taxes has no persistence. They then incorporate accrual components into our
persistence regression model and find that the persistence of cash flow components
are generally higher than those of accruals; however, accrual components do enhance
model performance.

Abdul Khan and Stephen Mayes (2009)

Measured macro fiscal level, the important of accrual accounting data for
macroeconomic policy arise from the fact that measures assets and liabilities that are
relevant to the overall stance of fiscal policy and fiscal sustainability, but which are
not measured by cash accounting. In particular, whereas cash accounting measures
only conventional debt, accrual accounting measures other quest- debt liabilities such
as accounts payable for the receipt of goods and services and employee’s liabilities.
So, accrual accounting data provides a broader measure of the burden of Government
financial commitments than the cash accounting.
Keanes Clothing (2009)
Worked maintaining adequate cash flow is vital essential for the accomplishment of a
business. An important element for business planning is the preparation of a cash flow
forecasting. Cash forecast is an estimate or prediction in this case of the likely cash
inflows and cash out flow over a period of time like any forecast for the established
company
Hossein Panahlan and Mehdi (2009)
Evaluated relationship between stock returns and two representative performance
measures means, operating income and cash flow from operation. They are clear in
their documents and there are no relationship between operating income and cash
from operations with stock returns. This was clear after investigated thesis variables.
48
The reason of this result can be difference existing between net incomes and operating
income (gain and loss) or effect of the news and rumors on IRAN burse. Therefore,
they investigated the relationship between operating income and cash from operation
with stock return simultaneously; accrual items dominate cash from operations in
terms of the relationship with stock return.
Sandra Cohen (2009)
Compared accrual accounting information with that of cash accounting in terms of
revenues, expenses and financial result in other to quantify their relationship. As cash
method in the Greek public sector still constitute main basis for performance
assessment and resource allocation decisions. The researcher wants to understand
whether they eventually reflect a fair proxy of accrual measures that are deemed more
suitable for these purposes. Empirical finding shows approximately 70% of accrual
accounting revenues (expenses) figures can be explained on the basis of cash based
revenues (expenses) as well as specific municipality socioeconomic factors.
Linda M. Nichols (2009)
Found out whether teaching the indirect or direct method of explaining the difference
between accrual operating income and cash flow from operations is more effective in
helping students understand the concept of accrual versus cash accounting. One
expects that because business students are accustomed to using accrual based
financial statements, they will understand cash flows better when presented with the
indirect method which starts with accrual based income and adjust it to be on a cash
basis.
Khodadadi et al (2009)
Investigated the ability of cash and accruals accounting information of profit in
prediction of future cash flows of listed companies in Tehran Stock Exchange. The
investigated sample of that study was selected among non-financial firms listed in
Tehran Stock Exchange whose financial statements were available in the period 2001-
2006. The results of their study showed that variables of past cash flows and accrual
components of past earnings had ability to predict future cash flows. The results of
testing their models indicated that the addition of accrual components of earnings into
cash flows increased the predictive power of this model.
Thomas. H. Beechy (2010)
Discussed about 3 factors which are: ● The nature and components of full accrual
accounting; ● The relationship between relevance sources and the costs of delivering
49
goods and services; ● The distinction between private goods and public (collective)
goods. About item number one the researcher says that full accrual accounting is not a
single concept and it constitutes several accounting concepts such as: 1) Accrual
accounting 2) expenses recognition 3) inter period allocation. Every organization
should use accrual accounting but applicability of the other two concepts depends on
the nature of the organization. The most of Nonprofit organizations provide goods are
those that can be enjoyed by only a limited number of beneficiaries, their use by some
individuals makes them unavailable to other once the supply is used up. Private goods
have a determinable output and therefore, a measurable cost. Often, on nonprofit
organizations that provide goods and services gets its revenue from one or both of two
sources. General revenues contributed by dues or other membership fees. User’s fees
charged for the private goods it delivers. User fees can be paid by either the user or by
someone else on the fees are paid; they are intended to cover the full cost of providing
the services. Therefore, in these situations the expense bias is appropriate.

Melik Serhat (2010)

Reported construction industry is an important sector that cash flow play an important
role for that because of the most risks sectors due to high level of uncertainties
included in the nature of the construction projects. Hence, a suitable cash planning
technique is very important for proper cost control and systematic cash management
while considering the risk and uncertainties of the construction projects. The purpose
of this study is to improve a realistic and cost schedule integrated cash flow modeling
technique by using fuzzy set theory for Chapter II: Review of Literature 70 including
the uncertainties in project cost and schedule resulting from complex and ambiguous
nature of construction works.
Charles, E. Jordan and Marilyn A. Waldron (2010)
Found that accrual basis measures are better predictors for future cash flows than
cash flow basis measure .So, accrual component basis are better for financial
managers and other users of financial statement for decision making.
Choong Yuel (2011)
Understood, analysts’ cash flow forecasts have become widely available through
financial services. Cash flow information enables practitioners to have a better
understand the real operating performance and financial stability of a company,
practically when earning information is noisy and of low quality.
50
Hadri Kusuma (2011)
Investigated and assess statements relative of cash flow disclosures as needed by the
Australian Accounting Standard Board (AASB) 1026 statement of cash flow. The
information capacity is estimated in terms of degree of the relationship between cash
flow variable and security returns. After examining the data relative to cash flow the
researcher found out two important factors such as: 1) To examine the capacity of the
cash flow component in predicting future cash flow. 2) To compare the capacity of
cash flows and earning in predicting future cash flows. The best result from
hypothesis tests reflecting the second objective show that cash flow have information
content more than that provided by earnings alone and cash flow information have
relative content, given earnings alone. This finding suggests that the cash flow
statement and income statement provide mutually exclusive information and previous
study from USA and UK that indicated cash flow data had less information value than
that of conveyed by earnings. This proof may suggest that data reported in cash flow
statement may be original data for decision making, separated from the income
statement.
Nichalas Davis (2011)
Tried for move from the cash basis to accrual basis of accounting in the Australian
public sector (APS). That was an important item of NPM for an improvement
planning and an event of historical significance. In this research the researcher
identified key events in these changes and to analyze them Chapter II: Review of
Literature 71 through the theoretical Lens Aobermas (1976) theory of legitimating.
The main discussion of this paper expressed within this paper that accrual accounting
is better device used by different level of Government in Australian public sector APS
in an attempt to combat the tendencies for economic, rationality and legitimacy
difficulties that are commensurate with welfare state societies such as Australia.
Jenis Cormier (2012)
Mentioned that the finance manager may use the received funds management to
voluntary receive funds forecasting. Put on document of the range of earning
management guarantee with Canadian Initial Public Offerings (IPOs) and study the
scope to which firms with best corporate control systems are less likely to use
achieving funds management to obtain their achieving funds estimates forecasting
IPOs prospectus.
Bin Du et al (2012)
51
Found out that again meet the role of the cash and accrual component of accounting
earning in predicting future cash flow and using out of sample predictions. The
researcher understands on average accruals improve upon current cash flow from
operations in predicting future cash flow. This paper clears that positive accruals are
more likely to improve upon current cash flow in prediction future cash flow. In this
paper the researcher has found out the continuity development of business
management depend on good adequate cash flow but not the best profit. Accrual cash
flow prediction can measure adequate liquidity. The paper centralization on cash flow
of company in short time and in this paper researcher clears that MELLRAL network
method has better prediction effect than ARIMA method. However, after short term
abnormal data adjustment the prediction effect has shown some improvement and he
can take as a result large amount of cash flow data have relatively within a company
for prediction.
Farzin Rezaei, and Zahra Safari (2013)
Reported determining the effective factors on market value of equity can help
shareholders to make an appropriate decision and allocate economic resources
efficiently. Profitability of companies is one of the most important criteria for
investors to assess companies, but relying on net profit regardless of its constituent
items will lead to loss of important and effective information on decision making and
therefore making improper decisions. The present study was carried out in order to
investigate and compare the explanatory power of different components of profit
including operating cash flow OCF, current accruals, and non-current accruals and
free cash flow, as well as to help explain the behavior of abnormal accruals in Tehran
Stock Exchange. The results indicate that information content of cash components of
earnings is higher than other components of earnings and also findings of the research
show that division of profit into two components of operating cash flow and accruals
relative to other profit combinations has a higher explanatory value.

52
 DATA ANALYSIS & INTERPRETATION
TABLE-4.1

CASH FLOW STATEMETN FOR THE YEAR ENDED 31ST MARCH 2014
Cash Flow Statement
Foods Fats & Fertilizers Limited 2013-14
Rs. Rs.
A. Cash Flow From Operating Activities

Net profit before tax 276151675

Depreciation 164359315
Loss on sale of fixed assets 437576
Profit on sale of fixed assets (21080480)
Assets Written off 4048
Interest Expense 244366242
Interest Income (51467802)
Dividend Income. (30984073)
Provision for investments 8732748
Net Gain/Loss on sale of foreign currency transactions (24929102)
Operating profit before working capital changes 565590867
Movements in working capital:-

Increase/{decrease} in trade payables 1025818737

Increase/{decrease} in long term provision 6966429
Increase/{decrease} in short term provision (680998)
Increase/{decrease} in other current liabilities 109506897
Increase/{decrease} in other long term liabilities 1315395
Decrease/{Increase} in trade receivables (381261517)
Decrease/{Increase} in inventories (1080300239)
Decrease/{Increase} in long term and advances 649080
Decrease/{Increase} in other Non-current Assets -
Decrease/{Increase} in short term loans and advances 15385231
Decrease/{Increase} in other current Assets -
Cash generated from operations 262989822
Direct taxes paid (net of refunds) 53627542
Net cash from operating activities 209362280
B. Cash Flow From Investing Activities
Purchase of fixed assets, including intangible assets
,CWIP&Capital advances (230805027)
Proceeds from sale of assets 27298811
Purchase of Non-current investment (90030000)
Purchase of current investment (52747134)
Interest income (52010034)
Dividend income 30984073
Buy back shares premium (120000000)
Net cash from /used in investing activities 171269599
C. Cash Flow From Financing Activities
Proceeds from long term Borrowings (145443460)
Proceeds from short term Borrowings 542331613
Interest paid (250547656)
Foreign exchange Fluctuations 2492102
Net cash from/ used in financing activities 171269599
Net increase / decrease in cash and cash equivalents 253365074
Cash and cash equivalents as at -------( opening balance ) (26753644)
Cash and cash equivalents as at --------( closing balance ) 256022438

53
INTERPRETATION:

Cash flow from operating activities:

Cash flow from operating shows the positive operation flows Rs. 276151675 in
the Year 2013-2014 which in adjustment for deprecation Rs. 164359315 interest
expense Rs. 244366242 and Interest received Rs.51467802 operating profit before
working capital changes is Rs. 565590867there is cash out flow because increase in
trade payables Rs.1025818737, increase in long term provisions Rs 6966429 and
increase in other current liabilities of Rs.109506897 respectively. The income tax
paid during the year is Rs.53627542.

Cash flow from investing activities:

There is huge cash out by way of investing fixed assets of Rs 230805027 by cash flow
by way of sales of fixed assets Rs. 27298811 and interest received on investing
activities Rs. 52010034. The net cash used in investing activities Rs171269599.

Cash flow from financing activities:

There is cash inflow by way of provides from long term borrowings Rs.
145443460 and short term borrowings is Rs.542331613. The net cash used in
financial activities for the year Rs171269599
The cash balance cash and cash equivalent during the year 2013-2014 from
Net increase / decrease in cash and cash equivalents is Rs.253365074.

54
 TABLE-4.2

CASH FLOW STATEMETN FOR THE YEAR ENDED 31ST MARCH 2015
Cash Flow Statement
Foods Fats & Fertilisers Limited 2014-15
Rs. Rs.
A. Cash Flow From Operating Activities
Net profit before tax 325636184
Depreciation 128301528
Profit on sale of fixed assets (12120)
Loss on sale of fixed assets 645558
Assets Written off --
Interest Expense 217636961
Interest Income (58377009)
Dividend Income (67196852)
Provision for investment 34930990
Net Gain/Loss on sale of foreign currency transactions (16725995)
Operating profit before working capital changes 564839244
Movements in working capital:-

Increase/{decrease} in trade payables (190504786)

Increase/{decrease} in long term provision 961073
Increase/{decrease} in short term provision 2633586
Increase/{decrease} in other current liabilities 112453454
Increase/{decrease} in other long term liabilities 604963
Decrease/{Increase} in trade receivables (148642448)
Decrease/{Increase} in inventories (11604929)
Decrease/{Increase} in long term and advances (128293563)
Decrease/{Increase} in other Non-current Assets --
Decrease/{Increase} in short term loans and advances 42181129
Decrease/{Increase} in other current Assets (10511287)
Cash generated from operations 234116437
Direct taxes paid (net of refunds) 74358617
Net cash from operating activities 159757820
B. Cash Flow From Investing Activities
Purchase of fixed assets, including intangible assets
,CWIP&Capital advances (352654004)
Proceeds from sale of assets 3090873
Purchase of Non-current investment (54043900)
Purchase of current investment --------
Interest income 54980381
Dividend income 67196852
Net cash from /used in investing activities (281429797)
C. Cash Flow From Financing Activities
Proceeds from long term Borrowings (258623545)
Proceeds from short term Borrowings 480717079
Interest paid (221296409)
Dividend paid (69832453)
Foreign exchange Fluctuations 16725995
Proceeds from Increase in capital shares( including
premium) 99990375
Net cash from/ used in financing activities 47861042
Net increase / decrease in cash and cash equivalents 179374139
Cash and cash equivalents as at -------( opening balance ) (73990935)
Cash and cash equivalents as at --------( closing balance ) 253365074

55
INTERPRETATION:

Cash flow from operating activities:

Cash flow from operating shows the positive operation flows Rs. 325636184 in

the Year 2014-2015 which in adjustment for deprecation Rs. 128301528 interest

expense Rs. 217636961 and Interest received Rs. 58377009 operating profit before

working capital changes is Rs. 564839244 there is cash out flow because increase in

increase in long term provisions Rs 96107 and increase in other current liabilities of

Rs. 112453454 respectively. The income tax paid during the year is Rs. 74358617.

Cash flow from investing activities:

There is huge cash out by way of investing fixed assets of Rs 352654004 by cash flow

by way of sales of fixed assets Rs. 3090873 and interest received on investing

activities Rs. 54980381. The net cash used in investing activities Rs 281429797.

Cash flow from financing activities:

There is cash inflow by way of provides from long term borrowings Rs.

258623545 and short term borrowings is Rs. 480717079. The net cash used in

financial activities for the year Rs 47861042.

The cash balance cash and cash equivalent during the year 2014-2015 from

Net increase / decrease in cash and cash equivalents is Rs. 179374139.

56
 TABLE-4.3
CASH FLOW STATEMETN FOR THE YEAR ENDED 31ST MARCH 2016
Cash Flow Statement
Foods Fats & Fertilizers Limited 2015-16
Rs. Rs.
A. Cash Flow From Operating Activities

Net profit before tax 44,65,73,246

Depreciation 23,19,14,224
Net gain on sale of fixed assets (9,14,977)
Assets Written off 58,14,817
Interest Expense 17,09,65,009
Interest Income (5,14,41,201)
Dividend Income (8,18,77,303)
Net Gain/Loss on sale of foreign currency transactions (1,82,20,600)
Operating profit before working capital changes 70,25,13,216
Movements in working capital:-

Increase/{decrease} in trade payables 15,67,14,315

Increase/{decrease} in long term provision (28,85,477)
Increase/{decrease} in short term provision 11,95,396
Increase/{decrease} in other current liabilities (11,45,99,969)
Increase/{decrease} in other long term liabilities (5,47,339)
Decrease/{Increase} in trade receivables (12,30,18,221)
Decrease/{Increase} in inventories (9,92,79,614)
Decrease/{Increase} in long term and advances (1,05,38,503)
Decrease/{Increase} in other Non-current Assets --
Decrease/{Increase} in short term loans and advances (31,03,63,795)
Decrease/{Increase} in other current Assets 1,05,11,287
Cash generated from operations 20,97,01,295
Direct taxes paid (net of refunds) (9,08,19,803)
Net cash from operating activities 11,88,81,492

B. Cash Flow From Investing Activities

Purchase of fixed assets, including intangible assets
,CWIP&Capital (25,55,31,101)
Proceeds from sale of assets 15,46,521
Purchase of Non-current investement (4,00,01,700)
Purchase of current investement --
Interest income 5,85,02,481
Dividend income 8,18,77,303
Net cash from /used in investing activities 14,27,69,470
C. Cash Flow From Financing Activities
Proceeds from long term Borrowings (10,43,89,058)
Proceeds from short term Borrowings 46,74,28,281
Interest paid (16,00,65,492)
Dividend paid (7,84,24,860)
Foreign exchangeFluctutations 1,82,20,600

Net cash from/ used in financing activities 14,27,69,470

Net increase / decrease in cash and cash equivalents 28,74,18,966
Cash and cash equivalents as at -------( opening balance ) 10,80,44,826
Cash and cash equivalents as at --------( closing balance ) 17,93,74,139

57
INTERPRETATION:

Cash flow from operating activities:

Cash flow from operating shows the positive operation flows Rs. 44,65,73,246 in

the Year 2015-2016 which in adjustment for deprecation Rs. 23,19,14,224 interest

expense Rs. 17,09,65,009 and Interest received Rs. 5,14,41,201 operating profit

before working capital changes is Rs. 70,25,13,216 there is cash out flow because

increase in increase in trade payables Rs 15,67,14,315 and increase in short term

provisions of Rs. 11,95,396 respectively. Direct taxes paid (net of refunds) of Rs.

9,08,19,803.

Cash flow from investing activities:

There is huge cash out by way of investing fixed assets of Rs 25,55,31,101 by cash

flow by way of sales of fixed assets Rs. 15,46,521 and interest received on investing

activities Rs 5,85,02,481. The net cash used in investing activities Rs. 14,27,69,470.

Cash flow from financing activities:

There is cash inflow by way of provides from long term borrowings Rs.

10,43,89,058 and short term borrowings is Rs. 46,74,28,281.The net cash used in

financial activities for the year Rs 14,27,69,470.

The cash balance cash and cash equivalent during the year 2015-2016 from

Net increase / decrease in cash and cash equivalents is Rs. 28,74,18,966.

58
 TABLE-4.4
CASH FLOW STATEMETN FOR THE YEAR ENDED 31ST MARCH 2017
Cash Flow Statement
Foods Fats & Fertilizers Limited 2016-17
Rs. Rs.
A. Cash Flow From Operating Activities
Net profit before tax 23,27,28,174
Depreciation 17,10,32,210
Net gain on sale of fixed assets (6,04,354)
Assets written off 10,698
Dividend income (4,40,49,903)
Interest expenses 16,84,91,840
Interest income (5,27,62,826)
Net (gain)/Loss on Foreign exchange currency
transactions (3,35,67,335)

Operating profit before working capital changes 44,04,68,504

Movements in Working capital:-

Increase/{decrease} in trade payables (83,44,49,547)
Increase/{decrease} in long term provision 22,65,346
Increase/{decrease} in short term provision 17,70,192
Increase/{decrease} in other current liabilities 10,21,21,068
Increase/{decrease} in other long term liabilities (4,07,442)
Decrease/{Increase} in trade receivables 72,71,072
Decrease/{Increase} in inventories 27,36,66,962
Decrease/{Increase} in long term and advances 24,62,33,299
Decrease/{Increase} in other Non-current Assets (1,48,00,000)
Decrease/{Increase} in short term loans and advances (35,60,35,908)
Decrease/{Increase} in other current Assets
Cash generated from operations (15,44,74,586)

Direct taxes paid (6,60,39,270)

Net cash from operating activities (22,05,13,856)
B. Cash Flow From Investing Activities
Purchase of fixed assets, including intangible assets
,CWIP&Capital (32,43,78,987)
Proceeds from sale of assets 16,76 ,960
Purchase of Non-current investment (13,93,50,000)
Purchase of current investment (47,30,01,411)
Interest income 5,27,62,826
Dividend income 4,40,49,903
Net cash from /used in investing activities (83,82,40,709)
C. Cash Flow From Financing Activities
Proceeds from long term Borrowings 27,41,01,952
Proceeds from short term Borrowings 88,85,58,961
Interest paid (16,94,81,840)
Foreign exchange Fluctuations 3,53,67,335
Net cash from/ used in financing activities 1,02,85,46,408
Net increase / decrease in cash and cash
equivalents(A+B+C) 25,62,10,807
Cash and cash equivalents as at -------( opening balance ) (3,02,08,158)
Cash and cash equivalents as at --------( closing balance ) 28,54,18,965

59
INTERPRETATION:

Cash flow from operating activities:

Cash flow from operating shows the positive operation flows Rs. 23,27,28,174 in

the Year 2016-2017 which in adjustment for deprecation Rs. 17,10,32,210 interest

expense Rs. 16,84,91,840 and Interest received Rs. 5,27,62,826 operating profit

before working capital changes is Rs. 44,04,68,504 there is cash out flow because

increase in increase in short term provisions Rs 15,67,14,315 and increase in short

term provisions of Rs. 11,95,396 respectively. Direct taxes paid (net of refunds) of Rs.

9,08,19,803.

Cash flow from investing activities:

There is huge cash out by way of investing fixed assets of Rs 32,43,78,987 by cash

flow by way of sales of fixed assets Rs. 16,76 ,960 and interest received on investing

activities Rs 5,27,62,826. The net cash used in investing activities Rs. 83,82,40,709.

Cash flow from financing activities:

There is cash inflow by way of provides from long term borrowings Rs.

27,41,01,952 and short term borrowings is Rs88,85,58,961.The net cash used in

financial activities for the year Rs 1,02,85,46,408.

The cash balance cash and cash equivalent during the year 2016-2017 from

Net increase / decrease in cash and cash equivalents is Rs. 25,62,10,807.

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 TABLE-4.5
CASH FLOW STATEMETN FOR THE YEAR ENDED 31ST MARCH 2018
Cash Flow Statement
Foods Fats & Fertilizers Limited 2017-18
Rs. Rs.
A. Cash Flow From Operating Activities
Net profit before tax 40,62,35,871.33
Depreciation 17,07,90,786.90
Loss on sale of fixed assets 76,677.82
Assets Written off 2,218.50
Interest Expense 24,58,43,207.96
Interest Income -7,45,56,763.20
Dividend Income -10,43,16,236.13
Net Gain/Loss on sale of foreign currency transactions 7,00,41,435.35
Operating profit before working capital changes 71,41,17,198.24
Movements in working capital:-

Increase/{decrease} in trade payables 95,30,94,647.87

Increase/{decrease} in long term provision 29,62,107.00
Increase/{decrease} in short term provision 4,55,670.00
Increase/{decrease} in other current liabilities 19,52,50,618.61
Increase/{decrease} in other long term liabilities 36,61,222.00
Decrease/{Increase} in trade receivables 23,34,233.06
Decrease/{Increase} in inventories -46,89,70,602.65
Decrease/{Increase} in long term and advances -69,10,752.00
Decrease/{Increase} in other Non-current Assets -59,00,000.00
Decrease/{Increase} in short term loans and advances -30,22,35,130.14
Decrease/{Increase} in other current Assets -3,73,14,519.77
Cash generated from operations 1,05,05,45,232.22
Direct taxes paid (net of refunds) -8,50,44,988.80
Net cash from operating activities 96,55,00,243.42
B. Cash Flow From Investing Activities
Purchase of fixed assets, including intangible assets
,CWIP&Capital -12,43,40,937.24
Proceeds from sale of assets 58,111.23
Purchase of Non-current investment -26,24,38,500.00
Purchase of current investment -144,63,71,434.44
Interest income 7,45,56,763.29
Dividend income 10,43,16,236.13
Net cash from /used in investing activities -1,65,42,19,761.03
C. Cash Flow From Financing Activities
Proceeds from long term Borrowings -8,84,77,962.40
Proceeds from short term Borrowings 1,83,28,40,338.32
Interest paid -24,58,43,207.96
Foreign exchangeFluctutations -7,00,41,435.35
Net cash from/ used in financing activities 1,42,84,77,732.61
Net increase / decrease in cash and cash equivalents 48,45,47,408.96
Cash and cash equivalents as at -------( opening balance ) 73,97,58,215.00
Cash and cash equivalents as at --------( closing balance ) 25,52,10,806.04

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INTERPRETATION:
Cash flow from operating activities:

Cash flow from operating shows the positive operation flows Rs.

40,62,35,871.33 in the Year 2017-2018 which in adjustment for deprecation Rs.

17,07,90,786.90 interest expense Rs. 24,58,43,207.96 and Interest received Rs. -

7,45,56,763.20 operating profit before working capital changes is Rs 71,41,17,198.24

there is cash out flow because decrease in inventories Rs -46,89,70,602.65.

Decrease in long term and advances Rs -69, 10,752.00.Decrease/{Increase} in long

term and advances Decrease/{Increase} in other Non-current Assets -69,10,752.00

Decrease/{Increase} in other Non-current Assets -59,00,000.00 .Direct taxes paid

(net of refunds) of Rs. -8,50,44,988.80.

Cash flow from investing activities:

There is huge cash out by way of investing fixed assets of Rs -12,43,40,937.24 by

cash flow by way of sales of fixed assets Rs. 58,111.23 and interest received on

investing activities Rs 7,45,56,763.29.The net cash used in investing activities

Rs. -1,65,42,19,761.03.

Cash flow from financing activities:

There is cash inflow by way of provides from long term borrowings Rs. -

8,84,77,962.40 and short term borrowings is Rs1,83,28,40,338.32.The net cash used

in financial activities for the year Rs 1,42,84,77,732.61.

The cash balance cash and cash equivalent during the year 2017-2018 from

Net increase / decrease in cash and cash equivalents is Rs. 48,45,47,408.96.

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 RESULTS & DISCUSSIONS

 It is observed that the company cash from operations activities is very high
and it is a good sign for the company.
 It is identified that the cash flow from investing activities 2013-2018 are
negative because the company investing cash more in fixed assets.
 It is noticed that the company is dependent on long term funds as they involve
higher interest payments.
 It is found that the company is taking loans very frequently.
 It is observed that there is block of money with debtors.

 It is identified that the profit before tax & profit after tax is not satisfactory
because the expenditure of the company is high.

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 SUGGESTIONS

 It is suggested to the company the operating activities position is satisfactory

and try to maintain the same level.

 It is recommended to the company to reduce their investing activities in fixed

assets which lead to decrease in cash outflow.

 It is advised to the company that it should not only depend upon long term
funds but concentrate on some parts of its current assets with short term funds.
 It is recommended to the company to reduce its collection period to increase
profitability by using lock-box system or concentration Banking.
 It is suggested to the company that with increase in debtors there is block of
money so it is necessary to reduce the credit period and provide policies (like
discounts) to debtors.
 It is recommended to the company to reduce their expenses which lead to

increase in the Net profit.

64
 CONCLUSION

A Cash Flow Statement is a financial statement that shows a company’s

incoming and outgoing money (sources and uses o cash) during a time period (often
annually or quarterly). It shows how changes in balance sheet and income accounts
affected cash and cash equivalents, and breaks the analysis down according to
Operating, investing and financing activities. As an analytical tool the statement of
cash flows is useful in determining the short-term viability of a company, particularly
its ability to pay bills.
Cash flow and free cash flow, are often used as metrics to gauge whether
the financial performance of a company is sustainable. A company that is able to
consistently generate cash flow in excess of capital expenditures is considered to have
the flexibility to expand as new investment opportunities arise and/or to pay
additional dividend to shareholders.
It is a statement which shows the movement of cash and is a report of the
financial operations of the business undertakings of cash. It also helps to interpret the
required funds for the coming financial years. It is one of the financial statements
which are useful to know the strengths and weakness of 3F INDUSTRIES LIMITED,
as well as its historical performance and current financial condition can be
determined.

65
 BIBLIOGRAPHY

TEXT BOOKS

 M. Y. Khan, P. K. Jain - Financial Management 2001, (3rd Edition), Tata

McGraw – Hill, Publishing Company Ltd., New Delhi-110092.
 Dr. P. C. Tulsian – Financial Management, 2009, First Edition, Sultan. Chand
& Co. Ltd., Ram Nagar, New Delhi – 110 055.
 S.N. Maheshwari and S.K. Maheshwari – A Textbook of Accounting for
Management 2006 (1st edition), Vikas Publishing House Pvt. Ltd., New
Delhi -110025.

OTHER SOURCES:
 Annual reports of 3F Industries

WEBSITES:
www.3findustries.com

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