PROJECT REPORT

ON

CASH MANAGEMENT

AT

INTEX TECNOLOGY

Summer Training Project ReportSubmitted in the partial fulfillment of the Requirement for the award of the 

SHRI MATA VAISHNO DEVI UNIVERSITY,KATRA

 (Batch 2013-2015)

SUBMITTED BY

PAYAL GUPTA

PREFACE

Someone has rightly said that practical experience is far better and closer to the real

world than mere theoretical exposure. The practical experience helps the student to

view the real business world closely, which in turn widely influences his/her

perceptions and understanding of the real situation.

Finance constitutes the backbone of any business organisation. Every person has to

manage finance quite frequently during his entire life span. The research work entitled

“Cash Management Technique used by INTEX TECHNOLOGY.” aims to know cash

management by Intex. The present report is a part of the project that contains the work

done by me during the training period at Intex Technology.

True to the core, a properly and executed industrial training helps a lot in providing

linkage between the student and the industry. It develops the awareness of industrial

approach to problem solving based on a board understanding of the mode of operation

of industrial organization. This project has offered me an opportunity to put all my

efforts and the theoretical knowledge to practice and enhance my knowledge, and at the

same time, given me practical experience in the field of accounts. It is surely going to

help me in my future projects too. In the preparation of this report, I have made every

effort to ensure that all steps involved in development of this project are adequately

covered and the report be completed in it. Any suggestions for improvement, if

rendered, will be gratefully accepted. I sincerely hope that this project will prove pure

knowledge imparting, through provoking and thus stimulating future research work on

these guideline.

ACKNOWLEDGEMENT

I owe a great many thanks to a great many people who helped and supported me during

the writing of this book.

My deep sense of gratitude to  Mr. Rakesh Kichloo  ,[HR Manager ], Mr. Fateh

Sephia[Finance Manager], support and guidance. Thanks and appreciation to the

helpful people at [INTEX TECHNOLOGY], for their support.

I would also thank my Institution and my faculty members without whom this project

would have been a distant reality. I also extend my heartfelt thanks to my family and

well wishers.

TABLE OF CONTENTPREFACEACKNOWLEDGEMENT

S.no Content Page

1. Executive Summary

2. Objective of Study

3. Company Profile

4. Literature Review

5. Research Methodology

6. Limitation of the study

7. Analysis and Interpretation

8. Findings and recommendations

Bibliography

Abstract Summary

Finance constitutes the backbone of any business organisation. Every person has to manage finance

quite frequently during his entire life span. The research work entitled “Cash Management Technique

used by INTEX TECHNOLOGY.” aims to know cash management by Intex. The present report is a

part of the project that contains the work done by me during the training period at Intex Technology.

Under the study main focus is to put light on the working of the company related to cash management.

In this report it has been studied that how company manages its cash by managing its receivable and

payables. In order to manage its receivables company uses to give cash discount to its customers. In

order to maintain the record of its receivables company is in contract with HDFC bank. Bank also

provides factoring service to the company by charging some amount to the company. In order to

maintain records of its receivables bank provides the facility of CMS(Cash Management System).

In order to reduce the risk arising from the receivables company is incurring cost of collection from

debts. Company is paying large amount of money in order to maintain its cash. It has been observed

through cash flow statement that major flow of cash is from its operating activities and company is

investing its surplus cash for investment purpose which is beneficial for the company’s growth.

Company cash requirement and surplus cash is manage by the bank.

Objectives of Study

To Study Cash management of the company.

To study cash budgeting technique used by the company.

To study factors affecting cash budget of the company.

To study bank charges charged by the bank for cash management.

To study various services provided by bank to company for cash management.

To analyse and give suggestions for better management of cash.

INTEX TECHNOLOGYCorporate Profile

• Established : 1996

• Headquarters: New Delhi

• Products: Commenced business with just one item - Ethernet cards - in 1996 Today more

than 296 SKUs spread over 30 product groups

• Certification : ISO 9001: 2008

• Standing: The only company in India offering such a wide range of ICT products

under one brand across India through its own sales & service network

Intex Technologies (India) ltd., incepted in the year 1996 is a major player in India in mobile handset,

consumer durables and IT accessories. A pioneer in technology, Intex Technologies has a PAN-India

presence through its wide network comprising 29 stock and sales offices and over 800 service touch

points. The company is known for its consistent policy of transparent, fair and ethical trade practices.

It’s a ISO 9001 : 2008 Certified Company

With years of innovation and invaluable asset of more than 2000 employees, Intex Technologies has

established itself as a trusted name in the industry today. The company’s flagship brand 'INTEX'

covers 4 business segments which are mobile handsets, consumer durables, IT accessories and retail.

The Brand exhibits an exhaustive portfolio of more than 15 product categories ranging from mobile

handsets, multimedia speakers, LED TVs, washing machines to name a few.

The company has state of the art Centre for Research and Development in India and China which is

well-equipped with modern equipments and is headed by highly qualified and experienced team

looking after product design & development. These facilities ensure products are offered in line with

latest global standards.

Intex's manufacturing domain comprises factories in India and China manufacturing diverse products.

Intex is an ISO 9001:2008 certified company. The company’s operations are managed on a world-

class collaborative business solution – SAP on a Virtual Private network.

Moving at a CAGR of 41.02 % over the last 3 financial years, the company has reached a turnover of

more than Rs 20,000 million (2000 crore) in FY 13-14. The company clocked a phenomenal growth of

100% in its overall turnover in FY 13-14 over the previous year.

Sales are routed through a distribution network comprising 1100+ distributors and 50,000+ dealers

spread across the country. Products are also available at more than 250 dedicated counters of reputed

chains of hyper markets and specialty stores across the country, on TV shopping channels and e-

commerce sites.

Intex has global presence and Intex’s products are available in more than 70 countries worldwide.

7 Business Verticals divided into

• 5 product verticals –

• IT Accessories & Networking Solutions

• Mobile

• Consumer Durables

• Security Surveillance

• Power Electronics

• 2 industry segment verticals

• Retail

• Enterprise Solutions Group

• Diversifications

• Intex Styles – a furniture brand

• Intex Infraprojects

• Intex Developers

INTEX TECHNOLOGY, BARI BRAHMNAIntex technology bari brahmna is a manufacturing plant. It has a joint venture with Glotech

Technology.it is having the strength of 300 employees. Mr. Narenra Bansal and Mrs. Alpha Bansal are

the owner of the company. Company has six departments in i.e. HR, Purchase, Production, Quality,

Process and excise and dispatch department. The company was formed in 2003.

Its headquarter is located in New Delhi. It Manufacture and supply woofer systems, speakers in

Jammu as well as all over India.

They also design the PCB boards.

VISION, MISSION & GOALS

Vision

Make Intex a globally respected name.

Improve the quality of life of the people.

MissionFocus on customer delight.

Seek technology and trade leadership.

Build corporate image.

Quality people.

Enhance work culture & environment.

Better and effective communication.

Optimise resource management.

Set benchmarking standards for corporate governance.

Sustained sales and profitability.

GoalsCompany realize their vision by

Market leadership.

Ethical practices.

Innovating in all facets of life.

Caring for the stakeholders.

Uplifting the "Deprived" by providing Healthcare, Education, Vocational Training and basic

needs.

Conducting ourselves as good citizens.

Innovation

Constant innovation is one of the pillars of the company’s success, the business segments cover a

portfolio of 35 Product Groups spread across more than 350 products ranging from Desktops,

Notebooks, TFT-LCD monitors, DVD players, Home Theatre Systems, Subwoofers, Headphones,

MP3 Players, Web Cameras, UPS and Computer Peripherals to name just a few. In several product

groups such as Speakers/Subwoofers, UPS, Keyboard, Mouse, Add on cards, etc., the company enjoys

leading market shares in many states in India and in the global market. Intex Technologies, Dubai has

forayed into fast growing market of Tablet PC since 2011. Intex has already launched Triple Sim

handsets, apart from Dual Sim, Dual-memory options and built in projector for UAE & GCC market.

Intex mobiles cover one year warranty which is extended to more than 350 service centers across India

and to 15 other service centers internationally.

STRATEGIC ALLIANCES

INTEX's Alliances and Partnerships ensure their customers receive the best the industry has to offer.

INTEX's innovative products and services are underpinned by technology and solutions provided

through partnerships with industry-leading organizations. Some of them are as follows:

INDIAN CELLULAR ASSOCIATIONBOE (Top Panel Makers,

China)

Chipset companies

Mediatek Qualcomm Broadcomm

Spreadtrum

VAS

BBM WhatsApp Saavn

Sony Live GetIt WeChat

Zappak Gameloft Hungama

Bigfilx Disney OLX

Opera Qickr Newshunt

Nazaraa Lookeys

Literature Review

CASH MANAGEMENT

Cash flow is the oxygen that brings your business to life. As surely as you cannot live without air, a

business will grind to a halt if starved for cash.

 Cash Management is concerned with the management of collections and disbursement of cash,

determination of optimum level of cash and investment of surplus cash into securities. Cash

management includes management of cash inflow, cash outflow, estimation of cash requirement,

ascertaining cost of managing cash, techniques of managing cash. Cash management also includes

management of cash as well as cash equitant i.e. Bank accounts etc. Cash management is done because

all the transactions in the business in done in cash, so there is need for estimation of cash in future for

smooth running of the business. So cash management is very important for every organization.

If at any time, because of a lack of cash, a corporation fails to pay an obligation when it is due, the

corporation is insolvent. Insolvency is the primary reason firms go bankrupt. Obviously, the prospect

of such dire consequence compels companies to manage their cash with care. Moreover, efficient cash

management means more than just preventing bankruptcy. It improves the profitability and reduces the

risk the firm is exposed to.

A successful business rests on sound recordkeeping practices and solid cash flow. Without good

records it is impossible to determine the financial condition or profitability of a business. Similarly, in

order to survive a small business must achieve a positive cash flow in the long term. This Financial

Guide provides the basic information the owner of a small business need to establish good record

keeping practices in your business and to minimize cash flow problems.

Objectives of Cash Management

To make payment according to the payment schedule.

To meet cash disbursement needs of the firm on a continuous & regular basis.

To minimize funds in the form of cash balance which remains idle.

To prevent bankruptcy

Good relation with bank

Good relation with trade creditors & suppliers.

To lead strong credit rating

To meet unexpected cash expenditure

To maintain balance level

To identify surplus cash

To identifying the points of shortfalls & to plan & arrange adequate cash

To improve the profitability of the firm

To keeps the bank overdraft limit under control

To strike a balance between liquidity & profitability

To make instant cash payments & avail of the facilities of cash discounts.

To take advantage of speculative opportunities

Importance of Cash Management

Cash management also includes management of cash as well as cash equitant i.e. Bank accounts etc.

Cash management is done because all the transactions in the business in done in cash, so there is need

for estimation of cash in future for smooth running of the business. So cash management is very

important for every organization.

Following are the importance of managing cash for the organization.

It helps in maintaining adequate cash balance.

It helps in identifying surplus cash & investing them in marketable securities.

It helps in identifying the points of shortfalls & to plan & arrange adequate cash.

It helps in improving the profitability of the firm.

It helps in keeping the bank overdraft limit under control.

Factors Affecting Level of Cash

Level of cash depends upon many factors. Fluctuation in cash is due to many factors which should be

forecasted before hand in order to have proper cash proper cash management.

Matching of cash flows

Non recurring expenses

Cash short cost

Cost of excessive cash balance

Payment of loans

Firms capacity to borrow in emergency

TECHNIQUES OF CASH MANAGEMENT

• COLLECTION MANAGEMENT

• CASH FLOW STATEMENT

• PAYMENT MANAGEMENT

• CASH ESTIMATION

• SHORT TERM INVESTMENT

CASH MANAGEMENT

1. Receivable Management

Average collection period

Credit policy

Factoring

Cost of collecting debts

Discounting policy

2. Payable Management

Credit policy of supplier

3. Cash Flow Statement

Cash flow from operating activities

Cash flow from investing activities

Cash flow from financing activities

4. Cash forecasting

CASH MANAGEMENT

cash forcasting

bank reconcilation

Receicable management

Payables management

cash flow statements

Cash forecasting technique

5. Bank Reconcilation

RECEIVABLE MANAGEMENT

Receivables represent amounts owed to the firm as result of sales of goods and services in normal

course of time of business. These are claims of the firm against its customers and form parts of its

current assets receivable are also known as account receivable, trade receivable, customer receivable.

The period of credit and extend of receivables depends upon credit policy followed by the firm. The

purpose of maintaining or investing in receivable is to meet competition to increase the sale and profit.

PAYABLE MANAGEMENT

Payables represent amounts owed by the firm as result of purchase of goods and services in normal

course of time of business. These are claims of the supplier against its purchase and form parts of its

current liabilities Payables are also known as account Payables, trade Payables, customer Payables.

The period of credit and extend of Payables depends upon credit policy followed by the suppliers. The

purpose of maintaining or investing in Payables is to meet competition to increase the sale and profit.

CASH FLOW STATEMENT

Cash flow statement, also known as statement of cash flows or funds flow statement, is a financial

statement that shows how changes in balance sheet and income affect cash and cash equitant, and

breaks the analysis down to operating, investing, and financing activities. Essentially, the cash flow

statement is concerned with the flow of cash in and cash out of the business. The statement captures

both the current operating results and the accompanying changes in the balance sheet. 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 BUDGET

Cash budget is extremely important, especially for small businesses, because it allows a company to

determine how much credit it can extend to customers before it begins to have liquidity problems.

For individuals, creating a cash budget is a good method for determining where their cash is regularly

being spent. This awareness can be beneficial because knowing the value of certain expenditures can

yield opportunities for additional savings by cutting unnecessary costs. For example, without setting a

cash budget, spending a dollar a day on a cup of coffee seems fairly unimpressive. However, upon

setting a cash budget to account for regular annual cash expenditures, this seemingly small daily

expenditure comes out to an annual total of $365, which may be better spent on other things. If you

frequently visit specialty coffee shops, your annual expenditure will be substantially more.

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. The research

methodology included various methods and techniques for conducting a research. “Marketing

Research is a systematic design, collection, analysis, and reporting of data and finding relevant

solution to a specific marketing situation or problem.” Sciences define research as “ the manipulation

of things, concepts or symbols for the purpose of generalizing to extend, correct or verify knowledge,

whether that knowledge aids in construction of theory or in practice of an art.” Research is thus, an

original contribution to the existing stock of knowledge marketing for its advancement, the purpose of

research is to discover answers to the questions through the application of scientific procedure. My

research project has a specified framework for collecting the data in an effective manner. Such

framework is called “Research Design”. The research process which was followed by me consisted

following steps.

Defining the problem & Research Objectives

It is said, “A problem well defined is half solved”. The step is to define the project under study and

deciding the research objective. The definition of problem includes study of cash management

techniques used by the Intex Technology.

Developing the Research Plan:

The second stage of research calls for developing the efficient plan for gathering the needed

information. Designing a research plan calls for decision on the data sources, research approach,

research instruments, and contacts methods. The research is descriptive in nature and is aimed at

analyzing techniques used by the company for cash management.

The development of Research plan has the following Steps:

a.) Data Sources

Two types of data were taken into consideration i.e. Primary data and secondary data. My major

emphasis was on gathering the primary data. The secondary data has been used to make things more

clear.

1. Primary Data: Direct collection of data from the source of information, including personal

interviewing from the General Manager in finance and other finance officers in the company etc.

2. Secondary Data: Indirect collection of data from sources containing past or recent information

like, Annual Publications, Books, Newspaper and Magazines etc.

Research instrument

A questionnaire was constructed for my queries. A Questionnaire consisting of a set of questions was

presented to respondents for their answers.

a.) Sampling Plan

The sampling plan calls for three decisions.

1. Sampling unit: Who is to be interviewed?

The target person must be defined that has to be interviewed. It is necessary so as to gather

information so that person interviewed has full knowledge about the information.

2. Contact Methods

Once the person to be interviewed is determined, the question is how the subject should be contracted

i.e. by telephone, mail or personal interview. Here in this research, I have contacted the respondents

through personal interviews.

3. Collecting the information

The collection of data is a tedious task. For conducting any sort of research data was needed. So for

my research, there was plenty of primary data and for increasing the validity of information collected,

some books, journals, pamphlets, information about the company were studied and taken into

considerations. After this, I have collected the information from the respondents with the help of

questionnaire.

a.) Collection of Primary Data: Primary Data is the data collected from the original source. In my

survey and study, there was optimum availability of primary data because every aspect was witnesses

carefully at each point. Questionnaire and personal interviews were the main instruments, which were

used for collecting primary data.

b.) Collection of Secondary Data: Secondary Data is the one which has already been collected by

someone else and some other person is using that information. The source of secondary data was,

some related books and websites related to the company. The competent staff of the company helped

me a lot in providing information about the company.

c.) Analyze the Information: The next step is to extract the pertinent findings from the collected

data. I have tabulated the collected data and developed frequency distributions. Thus the whole data

was grouped aspect wise and was presented in tabular form. Thus, frequencies, comparison and

percentages were prepared to render impact of the study.

Presentation of findings:

This is the last and important step in the research process. The findings are presented in the form of

graphs, pie charts, conclusions, suggestions and recommendations after data analysis.

LIMITATIONS OF THE STUDY

1) There are various methods of analysing the same data.

2) Limited access to secondary data pertaining to Intex Technology performance in other regions or

any other information was another problem in finding a correct response.

3) Difficulty in getting meaningful data as data is confidential.

4) Most of the times people don’t give appropriate information.

6) The data is analysed for limited period of time.

ANALYSIS AND INTERPRETATION

CASH MANAGMENT BY INTEX TECHNOLOGY.

Company is having contract with which provide various facilities like:-

• Collection of funds

• Payment of fund

• Providing guarantees

• Issuing letter of credit

• Bill discounting facility

• Administration of credit sales

• Maintenance of sales register

• Credit control

• Protection from bad debts

• Provision of Finance

• Rendering advisory services

TERMS OF CONTRACT OF INTEX TECHNOLOGY WITH AXIS

Credit Facility of Rs. 2.7 Crores.

Receivable Management by INTEX INDUSTRIES

1. Average Collection period

Average collection period measures the quality of debtors. A short collection period implies

prompt payment by debtors. It reduces the chances of bad debts. Similarly, a longer collection

period implies too liberal and inefficient credit collection performance. It is difficult to provide a

standard collection period of debtors. Higher period is always beneficial for the company.

Company always prefers prefer advance payment from customers which reduces the risk of bad

debts .For advance Payment Company provide cash discount.

Calculation of the average collection period of the company

ACP = (Days)*(Average Accounts Receivable) / (Credit Sales)

year 2013 2014

Sales 2231.89 2333.82

Average debtors/Closing debtors 66.07 86.74

Debtors turnover ratio 33.78 26.9

Average collection period 11 days 14 days

Analysis & Interpretation

Average collection period for 2013 is 11 days and 14 days in 2014. Company is mainly focusing

on advance payment collection and providing cash discounts to the customers. Increase in

Average collection period is due to increase in credit sales. Since the company is providing 21

days period to customers even than customers are average collection period is quite low that

means most of payments are done on cash basis.

Credit Policy of Company

Though most consumers expect to pay cash or use a credit facility while making a purchase,

commercial customers typically want to be billed for any products and services they buy.

Company need to decide how much credit you're willing to extend them and under what

circumstances. There's no one-size-fits-all credit policy--your policy will be based on your

particular business and cash-flow circumstances, industry standards, current economic conditions, and

the degree of risk involved.

As company create its policy, consider the link between credit and sales. Easy credit terms can be an

excellent way to boost sales, but they can also increase losses if customers default. A typical credit

policy will address the following points:

• Credit limits. Credit limit means an amount (limit) is fixed up to which customer can avail

credit facility. After the limit is over customer cannot make billing more than its credit limit.

To do more billing he has to make payment.

• Credit terms. If you agree to bill a customer, you need to decide when the payment will be

due. Your terms may also include early-payment discounts and late-payment penalties.

INTEX. Provides no credit limit to its customers. Customer can avail credit facility up

to any limit it initiate increase in sale. To manage its receivables company is using good credit

policy in which it is giving 45 day credit to its customers. In order to initiate early payment from

customers company is providing cash discount. In order to cover the risk of non-payment from

customer company receives blank cheques from the customer under the company name signed by

the party. In case of cheque bouncing company debits customer account with Rs.500 per cheque.

For early payment i.e. advance payment by the customer company credits customer account with

Interest for the particular period at 16% interest rate

Product no. of days

Channel Finance 45 days

Non Channel Finance 20 days

Factoring Services by AXIS Bank

Receivables constitute a significant portion of current assets of a firm. Firm has to incur certain

cost such as cost of financing receivables and cost of collection from receivable and cost of

collection from receivables. Further there is a risk of bad debts also. It is very essential to have a

proper control on management of receivables.

Small firms may handle the problem of receivable management of its own, but it may not be

possible for large firms to do so efficiently as it may be exposed to the risk of more and more bad

debts. A factor is financial institution which offers services relating to management and financing of

funds arising out of credit sales.

Factor services provided by bank:

1. Bill Discounting Facility:

AXIS is providing bill discounting facility. Company is discounting bills of exchange

received from customers. Discounting of bill worked as short term finance for the company.

AXIS Bank is discounting under following terms and conditions for purchase bill

discounting limits.

2. Bank Guarantee/ letter of credit:

Letters of credit ensure that a transaction proceeds as planned, while bank guarantees reduce the

loss if the transaction doesn't go as planned. A letter of credit is an obligation taken on by a IDBI

bank to make a payment once certain criteria are met. Once these terms are completed and

confirmed, the bank will transfer the funds. This ensures the payment will be made as long as the

services are performed.

A bank guarantee, like a line of credit, guarantees a sum of money to a beneficiary. Unlike a line

of credit, the sum is only paid if the opposing party does not full fill the stipulated obligations

under the contract. This can be used to essentially insure a buyer or seller from loss or damage

due to non performance by the other party in a contract.

CMS (Cash Management Service)Cash management service is provided by axis bank. Under this facility proper record of receivables is

maintained by the bank. Thousands of cheques are received by the company in a day. This is very

difficult practice for company to make records of all receivables. So bank is providing the facility of

managing receivables from various customers.

Bank prepares CMS report for every month which contains following information client code,

transaction date, transaction date, deposit number, product code, Dr, Cr amount, Drawer name, Drawer

Bank, Remarks

CMS REPORT INCLUDE.Transaction Date: Transaction date is the date on which transaction is made.

Deposit no: Deposit no is the number of bank voucher when deposit is made.

Deposit date: Deposit date is the on which cheque is presented with the bank.

Product Code: Product Code is the code of the bank according to which charges are charged by

the bank.

Debit Amount: Debit amount is the amount with customer is debited

Credit Amount: It is the amount of cheque received by the bank and amount credit to our

account.

Drawer: Drawer is the name of the party by which cheque is drawn.

Discount policy of INTEX TECHNOLOGYDiscounting policy is very important source of making cash sale. If company is having good

discount policy for its customers it can improve its debtor’s turnover ratio as well as flow of cash

during the year. Good discount policy initiates customers to make early cash payment which

helps benefit both the customer as well as company. Discount policy generally includes two types

of discounts.

Types of Discounts

• Cash Discount

• Trade Discount

Cash Discount:

An incentive that a seller offers to a buyer in return for paying a bill owed before the scheduled

due date. The seller will usually reduce the amount owed by the buyer by a small percentage or a

set dollar amount. If used properly, cash discounts improve the days-sales-outstanding aspect of a

business's cash conversion cycle.

Company is providing different rates of cash discount for different products. By providing cash

discount company is inviting early cash payment by its customers. Following are the rates of discount

which company is providing for different products.

Cost incurred by the Company for collection of debts

Receivables constitute a significant portion of current assets of a firm. Firm has to incur certain

cost such as cost of financing receivables and cost of collection from receivable and cost of

collection from receivables. Further there is a risk of bad debts also. It is very essential to have a

proper control on management of receivables. Company incur following cost for collection of

receivables.

1. Legal Procedure Cost

2. Bad debts cost

3. Bank charge (CMS charges)

Legal Procedure Cost:

Company is following procedure for collection of debts. In Case of bounce back of cheque of the

customer the customer is credited with Rs. 500 for each cheque. In case of non payment a notice

is sent to the party for non payment with cost the company Rs. 550 for every notice. In case of no

response from the party a complaint is filed against the party with cost Rs. 4400 and other

expenses incurred are Rs. 1000. In case the party is making payment number of persons is sent to

the party for collection of payment whose cost depends upon number of person sent, cost per person

and number of days person is sent.

Cash flow statement

NOTICE COMPLAINT

PERSON IS SENT FOR

COLLECTING OF

PAYMENTS

BAD DEBTS

Meaning of Cash Flow Statement:

Cash flow statement, also known as statement of cash flows or funds flow statement is a

financial statement that shows how changes in balance sheet accounts and income affect cash and cash

equivalents, and breaks the analysis down to operating, investing, and financing activities.

Essentially, the cash flow statement is concerned with the flow of cash in and cash out of the

business. The statement captures both the current operating results and the accompanying

changes in the balance sheet. 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.

International Accounting Standard 7 (IAS 7) is the International Accounting Standard that deals

with cash flow statements.

Purpose of Cash Flow StatementThe cash flow statement reflects a firm's liquidity. The balance sheet is a snapshot of a firm's

financial resources and obligations at a single point in time, and the income statement

summarizes a firm's financial transactions over an interval of time. These two financial

statements reflect the accrual basis accounting used by firms to match revenues with the expenses

associated with generating those revenues. The cash flow statement includes only inflows and

outflows of cash and cash equivalents; it excludes transactions that do not directly affect cash receipts

and payments. These noncash transactions include depreciation or write-offs on bad debts or credit

losses to name a few. The cash flow statement is a cash basis report on three types of financial

activities: operating activities, investing activities, and financing activities. Noncash activities are

usually reported in footnotes.

The cash flow statement is intended to:

1. Provide information on a firm's liquidity and solvency and its ability to change cash flows

in future circumstances.

2. Provide additional information for evaluating changes in assets, liabilities and equity

3. Improve the comparability of different firms' operating performance by eliminating the

effects of different accounting methods

4. Indicate the amount, timing and probability of flows

Forecasting Technique used by INTEX INDUSTRIES

Cash forecasting is very important aspect of managing cash. Insufficient funds may lead to

disturbance in smooth running of the business. Excess cash can be invested in short term

securities ie. Excess holding of cash may lead to loss of income. So in order to get maximum

benefit neither there should be excess cash nor insufficient cash. An expert knowledge is required

forecasting cash.

Cash can be managed by forecasting the receivables since we know amply number of cheque are

received by the company during the period . On the other payment side all the expenses due on

average basis and the amount of payments are forecasted with the minimum balance required

cash required is forecasted and insufficient funds should be deposited and excess amount should

be invested in short term securities.

INTEX INDUSTRIES. is in contract in with AXIS for forecasting their cash. Company receives

post-dated cheque from its customers in advance and record of all the cheques received is

maintained through CMS report by AXIS bank. And record of all the cheques to be presented with the

bank given to the vendor by the company is also kept. Day cash requirement is forecasted by

forecasting the day expenses at the end of the day if there are sufficient funds these are invested in

short term securities and if there are insufficient funds bank overdraft facility is activated for short

term. Company is having limit of 200 cr. which is not been fully utilized by the company so major

forecasting is not required by the company.

In case of major investment i.e. Long term investment projects cash is forecasted by the AXIS bank.

Cost of funds to be raised is forecasted and cheaper source is accepted.

Bank Reconciliation StatementA businessman maintains several books of accounts out of which cash book is an important book.

By cash book, we refer to three column cash book having bank column on both the sides. For

traders or customer bank account is an asset account and therefore it is debited whenever money

is deposited and debits all the withdrawals. Thus the transactions appearing on the debit sides of

the bank column of cash book will be shown by the bank in the deposit column of passbook and

entries on the credit side of cash book will appear in the withdrawal column of pass book further

it can be inferred that the debit balance of bank account in the book of trader should be equal to

credit balance of traders account in the books of trader should be equal to credit balance of bank

account in the book of trader should be equal to debit balance of passbook.

Reasons for difference

1. Cheque deposited but not credited by bank.

2. Cheque issued but not yet presented.

3. Bank Charges.

4. Direct receipt by the bank.

5. Interest charged by bank.

6. Interest allowed by bank.

7. Direct payment by bank.

8. Bill discounted but dishonoured.

9. Error on the part of trader.

10. Errors committed by bank.

Bank reconciliation statement is maintained on daily basis by INTEX. Since there are

thousands of transactions every day. Numbers of cheques are deposited and large amount of

charges are debited by bank. So it creates difference in cash book and pass book. In order to

cover this difference bank reconciliation statement is prepared. Online access is made every

morning to reconcile previous day statement. Bank reconciliation statement helps in proper cash

management. It helps to know exact cash balance in the bank and also helps in rectifying our cash

account. Customer account will credited only if bank has credited the amount to our companies

bank account.

SWOT Analysis

Strengths, Weaknesses, Opportunities, Threats

STRENGTH

Low cost

Simplicity

Flexibility

Collaborative

Quickness

Since its qualitative, it can be used as a discussion tool

A good first step before a more in-depth analysis or a good summary of detailed findings

Takes into consideration of external business environment as well as internal capabilities

WEEKNESS

It may tend to persuade companies to compile lists rather than think about what is actually

important in achieving objectives

No suggestions for solving disagreements

Can become too focused on the short term

No obligation to verify statements or aspects based on the data or the analysis

It also presents the resulting lists uncritically and without clear prioritization

THREAT

Increasing competition from low cost manufacturing companies

Many legal formalites

Article 370

Growth in Turnover (INR Million)

Findings and Recommendations

Findings

1. Company is managing its cash well and spending large amount of funds for its cash

management system.

2. In spite of having credit of period of 45 days average collection period is 11 days. That

means cash discount provided to the customers is helpful to the company for collecting of

funds.

3. Company is investing its funds in long term investment which will be helpful to

company for long further growth.

4. Major cash management is done on contract basis by HDFC bank which includes

maintaining receivable management records through CMS. Bank also provides factoring

service to the company.

5. Company is on growth and there is further scope of future growth.

6. Company is not using its cash sources of short term financing sources from outside which

reduce carrying cost of cash.

Recommendations/ Suggestions

1. Company can review existing service providers for cash management and other

service providers, making initial presentations and discussions with banks and providers.

Companies can shortlist potential providers for further in-depth discussions and

presentations. It helps in reducing carrying cost of cash.

2. Company can reduce its inventory to maximum extend .So that there should be less

blockage of funds in Inventory.

3. In order to reduce average collection period company can liberalize its cash discount

policy. This will initiate the customers to make early payment and help in better flow of

funds.

4. Company can invest idle funds wisely may help you to generate income from your

working capital, increasing your yields while maintaining liquidity. There are a wide

variety of investment instruments available to companies seeking a return on excess cash.

However, there are ways company may be able to improve yields on our idle working

capital.

5. For better cash management or in order to find minimum cash balance required for the

company can use control charts with the help of this company will able to invest its

excess amount of funds in short term securities and can reduce bank charges charged by

the bank for overdraft purpose.

BIBLIOGRAPHY

BOOKS

Shashi K Gupta, R. k Sharma. (2010), Financial Management, 6th Edition. New Delhi: Kalyani

Publisher. PP 23.1-23.20

William J Stevenson. (2010), Operation Management, 9th Edition. New Delhi: Tata McGraw-Hill

Publishing Co. PP 446-447.

Journals

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