CASH FLOW STATEMENT ANALAYSIS

IN

MANAPPURAM FINANCE LIMITED

DEPARTMENT OF MANAGEMENT STUDIES Dr. LANKAPALLI BULLAYYA P.G. COLLEGE Andhra University Visakhapatnam-530013 (2012 - 2014)

INTRODUCTION In the modern business society finance plays a vital role. Finance is regarded as THE
LIFE BLOOD OF BUSINESS ENTERPRISE. Financial statement analysis is the best technique for analyze the financial performance of any company. The term financial analysis also known as analysis and interpretation of financial statements, refers to the process of determining financial strengths and weaknesses of the firm by establishing strategic relationship between the items of the balance-sheet, profit and loss account and other operative data. Financial statement analysis can be under taken either by the management of the firm or by the outside parties. The nature of analysis defers depending upon the purpose of the analysis. The analyst is able to say how well the firm could utilize the resource in generating goods and services. Financial Statement: A formal record of all relevant financial information of a business, person, or other entity, presented in a structured and standardized manner to allow easy understanding.. A financial statement is a formal report of the financial activities of a business, person, or other entity. Financial statements are a key component of accounting; the process of communicating information about financial entity financial statements is presented in a structured manner with conventions accepted by accounting and regulatory personnel.

Prospective investors use financial statements to perform financial analysis, which is a key component in making investment decisions.

A lending institution will examine the financial health of a person or organization and use the financial statement to decide whether or not to lend funds.

Philanthropies may use financial statements of a non-profit as a component in determining where to donate funds.

Government entities (tax authorities) need financial statements to ascertain the propriety and accuracy of taxes and other duties declared and paid by a company.

Vendors who extend credit may use financial statements to assess the creditworthiness of the business.

Uses of a Financial Statement Financial Statements are used for a Multitude of Different Purposes Readers of a financial statement are seeking to understand key facts about the performance and disposition of a business. They make decisions about the business based on their reading of the statements. Because financial statements are widely relied upon, they must be straightforward to read and understand. For large corporations, these statements are often complex and may include an extensive set of notes to the financial statements and explanation of financial policies and management discussion and analysis. The notes typically describe each item on the balance-sheet, income statement and cash flow statement in further detail. Notes to financial statements are considered an integral part of the financial statements. Owners and managers frequently use financial statements to make important business decisions, for example:

Whether or not to continue or discontinue part of the business. Whether to make or to purchase certain material. Whether to acquire or to rent/lease certain equipment in the production of go. The documents are also helpful in making long-term decisions and as a source of historical records.

Purpose of Financial Statements The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions Financial Statements provide useful information to a wide range of users: Managers require Financial Statements to manage the affairs of the company by assessing its financial performance and position and taking important business decisions. Shareholders use Financial Statements to assess the risk and return of their investment in the company and take investment decisions based on their analysis. Prospective Investors need Financial Statements to assess the viability of investing in a company. Investors may predict future dividends based on the profits disclosed in the Financial Statements. Furthermore, risks associated with the investment may be gauged from the Financial Statements. For instance, fluctuating profits indicate higher risk. Therefore, Financial Statements provide a basis for the investment decisions of potential investors. Financial Institutions (e.g. banks) use Financial Statements to decide whether to grant a loan or credit to a business. Financial institutions assess the financial health of a business to determine the probability of a bad loan. Any decision to lend must be supported by a sufficient asset base and liquidity. Suppliers need Financial Statements to assess the credit worthiness of a business and ascertain whether to supply goods on credit. Suppliers need to know if they will be repaid. Terms of credit are set according to the assessment of their customers' financial health. Customers use Financial Statements to assess whether a supplier has the resources to ensure the steady supply of goods in the future. This is especially vital where a customer is dependent on a supplier for a specialized component. Employees use Financial Statements for assessing the company's profitability and its consequence on their future remuneration and job security. Competitors compare their performance with rival companies to learn and develop strategies to improve their competitiveness.

General Public may be interested in the effects of a company on the economy, environment and the local community. Financial statement analysis (or financial analysis) is the process of understanding the risk and profitability of a firm (business, sub-business or project) through analysis of reported financial information, by using different accounting tools and techniques METHODS OR DEVICE OF FINANCIAL ANALYSIS: The analysis and interpretation of financial statement is used to determine the financial position and results of operations. A numbers of methods or device are used to study the relationship between different statements. AN effort is made to use those devices which those devise which analyze the position of the enterprise. The following methods of analysis are generally used: Funds flow analysis Cash flow analysis Common-size statements Comparative statements Ratio analysis Trend analysis

CASH FLOW STATEMENT: Cash flow statement is the statement which describes the inflows (sources) and outflows (uses) of cash and cash equalents in an enterprise during a specific period of time. Cash flow statement summaries the causes of changes in cash position of a business enterprise between dates of two balance sheets. It is an essential tool of financial analysis for short term planning. A series of liquidity is improving or deteriorating over a period of time and in comparison to other firms over a given period of time.

NEED FOR THE STUDY

The study has significance as it provides information to various parties who directly or indirectly interact with the company. The management of the company by providing a clear picture regarding important aspects likes liquidity, leverage, activity and profitability. The study is also beneficial to employees and offers motivation by showing how actively they are contributing for companys growth. The investors who are interested in investing in the companys shares will also get benefited by going through the study and can easily take a decision whether to invest or not to invest in the company shares. Need for the study includes the following: Financial statements are an important source of information for evaluating the performance and prospects of a firm. The properly analyzed and interpreted financial statements can provide valuable insights into a firms performance. Financial statement analysis may be done for a variety of purposes, which may range from a simple analysis of the short term liquidity position of the firm to a comprehensive assessment of the strengths and weakness of the firm in various areas. It is helpful in assessing corporate excellence, judging credit worthiness, forecasting bond ratings, intrinsic assessing market risk.

COMPANY PROFILE

With the Trust, Commitment and Transparency extending over 61 years, Manappuram Group has emerged as a force to reckon with, under the stewardship of Mr. V.P. Nandakumar, the Chairman of the company. Today with 9 companies under its fold, having more than 1,950 branches spread over 19 States of India and a total business over Rs. 70 Billion, a workforce of over 14,500 and a customer base of over 5 Million, we are India`s Largest Listed and Highest Credit rated Gold Loan Company. We are involved in providing a wide range of financial solutions to our customers that will make their life easy. The company was founded in 1949 by late Mr. V.C. Padmanabhan, a great visionary of his times. The company commenced its operations at Valapad, mainly with money lending activity on a very modest scale. The principal asset of the company was the impeccable integrity devotion and foresight of its founder. The company soon established itself as a safe haven for investments of the people of the area providing absolute safety and assured returns. On the sad demise of the founder in 1986, his illustrious son, Mr. V.P. Nandakumar, the present Chairman took over the reins. Under his dynamic leadership, the company never had to look back. Mr. Nandakumar was working as an officer of the erstwhile Nedungadi Bank, before he took over the captaincy of the company. Known for his sharp business acumen and professionalism, Mr. Nandakumar has been instrumental in taking the organization to its present level. With an alert mind and unconventional methods of problem solving, Mr. Nandakumar has put this organization on the launching pad. He believes that the future belongs to those who can advantageously use the technology to serve the customers by evolving customized products and services.

The Group`s flag-ship Company, Manappuram General Finance and Leasing Limited (MAGFIL) was established in 1992 in the wake of economic reforms launched by the Government of India mainly to take advantage of the importance assigned to Leasing as a vehicle to promote decentralized pattern of Economic Growth through small and medium enterprises. In a short span of time, MAGFIL had several Firsts. 1. First NBFC from Kerala to receive a Certificate of Registration issued by RBI mainly on the strength of the company`s ability to settle the depositors` claim in full. 2. First NBFC from Kerala to get a credit rating of "MA+" from ICRA, (a credit rating agency approved by RBI) which signifies the company`s ability to make timely repayment of the principal and interest under its Public Deposit Programmed. Within a short span of time MAGFIL recorded a phenomenal growth to become a premier NBFC from South India. 3. It is the FIRST NBFC from Kerala to have received Adequate Safety rating for its Secured Non- convertible Redeemable Debenture issue for Rs. 50 million. 4. First NBFC from Kerala to go for public issue. 5. First NBFC from Kerala to issue bonus shares at the ratio 1:1. 6. First NBFC from Kerala to receive Foreign Direct Investment (FDI). 7. First NBFC from Kerala to receive AD- II (Authorized Dealer - II) License from RBI. 8. First NBFC from Kerala to obtain Broker`s License from IRDA (Insurance Regulatory&DevelopmentAuthority). 9. First NBFC in the country to receive a Short-term rating of A1+ by ICRA and P1+ by CRISIL. These are the Highest Short Term Rating awarded by ICRA and CRISIL to any Corporate in India and Long term rating of LA+ for its working capital limit.

The company has been consistently making profit and paying dividends from the first full year of its operations. To facilitate the fund based activities, the company accepts deposits, Bonds and Non-convertible Debentures with attractive interest rates. The company was awarded "MA+" by ICRA which signifies adequate safety for customers` deposits. It also achieved the credit rating of "LA+" from ICRA for its working capital limit of Rs.1 billion under BASEL II norms. The shares of the company are listed in Mumbai, Chennai and Cochin Stock Exchanges and are actively traded in BSE at levels far above par. In 1993, this Group set up Manappuram Benefit Fund Limited, a NIDHI Company to provide specialized services to its members. Today, it is one of the topmost Nidhi Companies in South India. Manappuram Chits (I) Limited, a chit fund company registered under the Chit Fund Act 1982, a central legislation enacted by Government of India, was set up in the year 2000, where most of the Chit Fund Companies in Kerala found it difficult to conform to the discipline of this central legislation. As a part of its diversification, the company also started Forex business upon the Reserve Bank of India granting it a full-fledged money changers licence in the year 2002. The company also commenced in a big way for instant money transfer facility, in collaboration with Xpress Money, Coinstar, Instant Cash, Zoha, Ezremit and MoneyGram. Instant Money Transfers being the fastest method of inward and outward remittance of funds will be useful to NRIs for remitting money to or from their relatives in India, who will be able to receive the proceeds within a few minutes of remittance.

OBJECTIVES OF THE STUDY

The major objective of the present study is to know about financial strengths and weakness of MANAPPURAM FINANCE LIMITED through CASH FLOW STATEMENT ANALYSIS. An attempt was made to: To evaluate and analyze various facts of the financial performance of the company. To make comparisons between the various periods of cash flow statements. To analyze and interpret the financial performance of Manappuram finance limited over the years by using financial statement analysis. To summarize and to suggest strategies for the better financial performance of Manappuram finance limited. To offer appropriate suggestions for the better management of the company.

METHODOLOGY
Methodology adopted is collection of information in a systematic manner in order to analyze and verify a phenomenon. The information is collected through primary and secondary sources during the course of the study. There are two types of data collection methods:

Primary data collection Secondary data collection

Primary data:
It is the information collected directly without any references. In this study it is gathered through interviews with concerned officers and staff, , some of the information has been verified or supplement with personal observation conducting personal interviews with the concerned officers of finance department of Manappuram finance limited.

Secondary Data:
The secondary data was collected from already published sources such as annual reports and internal records, reference from textbooks and journals relating to financial management. The data collection includes. 1) Most of the computations are made from the figures contained in the financial statements provided by the company. 2) Collection of some of the information regarding theoretical aspects by referring standard texts and referred books. 3) 4) Collection of required data from annual records of Manappuram finance limited. Reference from text books and journals relating to financial management.

LIMITATIONS OF THE STUDY

Since the procedure and policies of the company will not allow disclosing confidential financial information, the project has to be completed with the available data given to us. The study is carried basing on the information and documents provided by the organization and based on the interaction with the various employees of the respective departments.

There was no scope of gathering current information, as the auditing has not been done by the time of project work. Financial analysis is based upon only monetary information and non- monetary factors are ignored. The limitations applicable for the secondary data will apply for the data which is collected from secondary sources. The time duration given to the project work eight weeks is not sufficient for the complete analysis.