Cash flow statement

ANALYSIS OF CASH FLOW STATEMENT OF DR.REDDY’S LABOROTARIES
K.L.E’s KF Patil Institute of Business Administration Page 1
EXECUTIVE SUMMARY
Cash flow analysis uses ratios that focus on cash flow and how solvent, liquid and
viable the company is. This study will focus on the application of the cash flow ratio
in evaluating the financial position of the Dr. Reddy’s Laboratories Ltd.
In 2001 Reddy’s completed its US initial public offering of $132.8 million, secured
by American Depositary Receipts. At that time the company also became listed on
the New York Stock Exchange. Funds raised from the initial public offering helped
Reddy’s move into international production and take over technology-based
companies.
To become a discovery ruled global pharmaceutical company with a core purpose of
helping people lead healthier lives.
Cash flow is the difference between the amount of cash flowing in and out a
company. Make sure to consistently include the different types of cash flows. It is
periodical statement as it covers a particular period of time, say month or year. It
shows moments of cash in between two balance sheet dates. It establishes the
relationship between net profit and changes in cash position of the firm. It does not
involve matching of cost against revenue.
It shows the sources and application of funds during particular period of time. Cash
flow analysis measures how much cash is generated and spent by the business during
a given period. It is the best measure of the company’s performance. Therefore, the
role played by cash flow statement in understanding the financial position of the
company is very much significant. Hence, we need to know how the cash flow helps
the organization in resolving its financial crisis. Therefore, the analysis of cash flow
statement is selected for the study.
The data can be collected and analyzed with the help of ratios, diagram and charts
which help in arriving to a conclusion.

TABLE OF CONTENTS
SL.
NO
CHAPTERS TOPIC PAGE
NO
 EXECUTIVE SUMMARY
1 CHAPTER – 1  INTRODUCTION TO THE STUDY
 TITLE OF THE PROJECT
 INDUSTRY PROFILE
2 CHAPTER – 2  COMPANY PROFILE
3 CHAPTER- 3  REVIEW OF LITERATURE
 CASH FLOW CONCEPTUAL FRAME
WORK
4 CHAPTER – 4  DESIGN OF THE STUDY
5 CHAPTER – 5  DATA ANALYSIS AND
INTERPRETATION
6 CHAPTER – 6  CONCLUSION
 FINDINGS
 SUGGESTION

CHAPTER – 1
INTRODUCTION TO THE STUDY
TITLE OF THE STUDY
INDUSTRY PROFILE

CHAPTER 1
INTRODUCTION:
Cash play a very important role in the economic life of the business. In fact, what
blood is to human body, cash is to a business enterprise. Thus, it is very essential for a
business to maintain an adequate balance of cash. Cash is the basic input needed to
keep the operations of the business going on a continuing basis, it is also the final
output expected to be realized by selling the product manufactured by manufacturing
unit. Cash is both the beginning and the end of the business operations.
Cash flow statement deals with flow of cash which includes cash equivalence as well
as cash. This statement is additional information to the users of financial statements.
The statement shows the incoming and outgoing of cash. Thus, cash flow statement
may be defined as a summary of receipts and disbursements of cash for a period. It
also explains reasons for the changes in cash position of the firm. The management of
cash also assumes importance because it is difficult predict cash inflows and outflows
accurately and there is no perfect coincidence between the inflows and outflows of
cash giving rise to either cash outflows exceeding inflows or cash inflows exceeding
outflows. Cash flow statement is one important tool of cash management because it
throws light on cash inflows and outflows of a period.
Cash flow analysis uses ratios that focus on cash flow and how solvent, liquid and
viable the company is. This study will focus on the application of the cash flow ratio
in evaluating the financial position of the Dr. Reddy’s Laboratories Ltd.
TITLE OF THE PROJECT
“A STUDY ON ANALYSIS OF CASH FLOW STATEMENT OF DR.
REDDY’S LABORATORIES”

INDUSTRY PROFILE
Dr. Reddy's originally launched in 1984 producing active pharmaceutical ingredients.
In 1986, Reddy's started operations on branded formulations. Within a year Reddy's
had launched Norilet, the company's first recognized brand in India. Soon, Dr.
Reddy's obtained another success with Omez, its branded omeprazole ulcer and reflux
oesophagitis medication launched at half the price of other brands on the Indian
market at that time.
Within a year, Reddy's became the first Indian company to export the active
ingredients for pharmaceuticals to Europe. In 1987, Reddy's started to transform itself
from a supplier of pharmaceutical ingredients to other manufacturers into a
manufacturer of pharmaceutical products.
INTERNATIONAL EXPANSION:
The company's first international move took it to Russia in 1992. There, Dr. Reddy's
formed a joint venture with the country's biggest pharmaceuticals producer, Biomed.
They pulled out in 1995 amid accusations of scandal; involving "a significant material
loss due to the activities of Moscow's branch of Reddy's Labs with the help of
Biome’s chief executive”. eddy’s sold the joint venture to the Kremlin-friendly
Sistema group. In 1993, Reddy's entered into a joint venture in the Middle East and
created two formulation units there and in Russia. Reddy's exported bulk drugs to
these formulation units, which then converted them into finished products. In 1994,
Reddy's started targeting the US generic market by building state of art manufacturing
facility.
Reddy's path into new drug discovery involved targeting speciality generics products
in western markets to create a foundation for drug discovery. Development of
speciality generics was an important step for the company's growing interest in the
development of new chemical entities. The elements involved in creating a speciality
generic, such as innovation in the laboratory, developing the compound, and sending
the sales team to the market, are also stages in the development of a new specialty
drug. Starting with speciality generics allowed the company to gain experience with
those steps before moving on to creating brand-new drugs.

Reddy's also invested heavily in establishing R&D labs and is the only Indian
company to have significant R&D being undertaken overseas. Dr. Reddy's Research
Foundation was established in 1992 and in order to do research in the area of new
drug discovery. At first, the foundation's drug research strategy revolved around
searching for analogues. Focus has since changed to innovative R&D, hiring new
scientists, especially Indian students studying abroad on doctoral and post-doctoral
courses. In 2000, the Foundation set up an American laboratory in Atlanta, dedicated
to discovery and design of novel therapeutics. The laboratory is called Reddy US
Therapeutics Inc (RUSTI) and its main aim is the discovery of next-generation drugs
using genomics and proteomics. Reddy's research thrust focused on large niche areas
in western markets anti-cancer, anti-diabetes, cardiovascular and anti-infection drugs.
Reddy's international marketing successes were built on a strong manufacturing base
which itself was a result of inorganic growth through acquisition of international and
national facilities. Reddy's merged Cheminor Drug Limited (CDL) with the primary
aim of supplying active pharmaceutical ingredients to the technically demanding
markets of North America and Europe. This merger also gave Reddy's an entry into
the value-added generics business in the regulated markets of APIs. APIs in medicine
EXPANSION AND ACQUISITION:
By 1997, Reddy's made the transition from being an API and bulk drug supplier to
regulated markets like the USA and the UK, and a branded formulations supplier in
unregulated markets like India and Russia, into producing generics, by filing
an Abbreviated New Drug Application in the USA.
It strengthened its Indian manufacturing operations by acquiring American Remedies
Ltd. in 1999. This acquisition made Reddy’s the third largest pharmaceutical
company in India, after Ranbaxy and Glaxo (I) Ltd., with a full spectrum of
pharmaceutical products, which included bulk drugs, intermediates, finished dosages,
chemical synthesis, diagnostics and biotechnology.
Reddy’s started exploiting Para 4 filing as a strategy in bringing new drugs to the
market at a faster pace. In 1999 it submitted a Para 4 application for Omeprazole, the

drug that had been the cornerstone of its success in India. In December 2000, Reddy’s
had undertaken its first commercial launch of a generic product in the USA. and its
first product with market exclusivity was launched there in August 2001. The same
year, it also became the first non-Japanese pharmaceutical company from the Asia-
Pacific region to obtain a New York Stock Exchange listing, ground-breaking
achievements for the Indian pharmaceutical industry.
In 2001 Reddy’s became the first Indian company to launch the generic
drug, fluoxetine (a generic version of Eli Lilly and Company’s Prozac) with 180-day
market exclusivity in the USA. Prozac had sales in excess of $1 billion per year in the
late 1990s. Barr Laboratories of the U.S. obtained exclusivity for all of the approved
dosage forms (10 mg, 20 mg) except one (40 mg), which was obtained by Reddy’s.
Lilly had numerous other patents surrounding the drug compound and had already
enjoyed a long period of patent protection. The case to allow generic sales was heard
twice by the Federal Circuit Court, and Reddy’s won both hearings. Reddy’s
generated nearly $70 million in revenue during the initial six-month exclusivity
period. With such high returns at stake, Reddy’s was gambling on the success of the
litigation; failure to win the case could have cost them millions of dollars, depending
on the length of the trial.
The fluoxetine marketing success was followed by the American launch of Reddy's
house-branded ibuprofen tablets in 400, 600 and 800 mg strengths, in January
2003. Direct marketing under the Reddy’s brand name represented a significant step
in the company’s efforts to build a strong and sustainable US generic business. It was
the first step in building Reddy’s fully-fledged distribution network in the US market.
In 2015, Dr. Reddy's Laboratories bought the established brands of Belgian
drugmaker UCB SA in South Asia for 8 billion rupees ($128.38 million).[
Dr. Reddy's
Laboratories also signed a licensing pact with xenoPort for their experimental
treatment to treat plaque psoriasis. As per the agreement, Dr. Reddy’s will be granted
exclusive US rights to develop and commercialize XP23829 for all indications for an
upfront payment of $47.5 million.

AMERICAN IPO AND EXPANSION INTO EUROP:
In 2001 Reddy’s completed its US initial public offering of $132.8 million, secured
by American Depositary Receipts. At that time the company also became listed on
the New York Stock Exchange. Funds raised from the initial public offering helped
Reddy’s move into international production and take over technology-based
companies.
In 2002, Reddy’s started its European operations by acquiring two pharmaceutical
firms in the United Kingdom. The acquisition of BMS Laboratories and its wholly
owned subsidiary, Meridian UK, allowed Reddy’s to expand geographically into the
European market. In 2003 Reddy’s also invested $5.25 million (USD) in equity
capital into Bio Sciences Ltd.
Auriegene Discovery Technologies, a contract research company, was established as a
fully owned subsidiary of Reddy’s in 2002. Auriegene's objective was to gain
experience in drug discovery through contract research for other pharmaceutical
companies. Reddy’s entered into a venture investment agreement with ICICI Bank, an
established Indian banking company. Under the terms of the agreement, ICICI
Venture agreed to fund the development, registration and legal costs related to the
commercialization of ANDAs on a pre-determined basis. Upon commercialization of
these products, Dr. Reddy's pays ICICI Venture royalty on net sales for a period of 5
years.
GLOBAL EXPANSION
The company elected to expand globally, and acquired other entities. In March 2002,
Dr. Reddy’s acquired BMS Laboratories, Beverley, and its wholly owned subsidiary
Meridian Healthcare, for 14.81 million Euros. These companies deal in oral solids,
liquids and packaging, with manufacturing facilities in London and Beverley in the
UK. Recently, Dr. Reddy’s entered into an R&D and commercialization agreement
with Argenta Discovery Ltd., a private drug development company based in the UK,
for the treatment of chronic obstructive pulmonary disease (COPD).

Dr. Reddy’s entered into a 10-year agreement with Rheoscience A/S of Denmark for
the joint development and commercialization of Balaglitazone (DRF-2593), a
molecule for the treatment of type-2 diabetes. Rheoscience holds this product’s
marketing rights for the European Union and China, while the rights for the US and
the rest of the world will be held by Dr. Reddy’s. Dr. Reddy’s conducted clinical trials
of its cardiovascular drug RUS 3108 in Belfast, Northern Ireland, in 2005. The trials
were conducted to study the safety and the pharmacokinetic profiles of the drug,
which is intended for the treatment of atherosclerosis, a major cause of cardiovascular
disorders.
Dr. Reddy’s entered into a marketing agreement with Eurodrug Laboratories, a
pharmaceutical company based in Netherlands, for improving its product portfolio for
respiratory diseases. It introduced a second-generation xanthine bronchodilator,
Doxofylline, which is used for the treatment of asthma and COPD patients.
In 2004, Reddy’s acquired Triteness Therapeutics Inc; a US-based private
dermatology company. This acquisition gave Reddy’s access to proprietary products
and technologies in the dermatology sector.
Dr. Reddy’s Para 4 application strategy for generic business received a severe setback
when Reddy’s lost the patent challenge in the case of Pfizer’s
drug Norvasc (amlodipinemaleate), a drug indicated for the treatment
of hypertension and angina. The cost involved in patent litigation as well as the
unexpected loss of the patent challenge affected Reddy’s plans to start speciality
business in the US generic markets.
In March 2006, Dr. Reddy’s acquired Beta harm Arzneimittel GmbH from 3i for 480
million Euros. This is one of the largest-ever foreign acquisitions by an Indian
pharmaceutical company. Betapharm is Germany’s fourth-largest generics
pharmaceutical company, with a 3.5% market share, including 150 active
pharmaceutical ingredients.
Reddy’s has promoted India’s first integrated drug development company Pelican
Pharma Pvt Ltd together with ICICI ventures capital fund management company Ltd
and Citigroup Venture Capital International growth partnership Mauritius Ltd. The

combined entity will undertake clinical development and out-licensing of new
chemical entity assets.
Dr. Reddy's is presently licensed by Merck &Co. to sell an authorized generic version
of the popular drug simvastatin (Zocor) in the USA. Since Dr. Reddy's has a license
from Merck, it was not subject to the exclusivity period on generic simvastatin.
As of 2006, Dr. Reddy’s Laboratories exceeded $500 million USD in revenues,
flowing from their APIs, branded formulations and generics segments; the former two
segments account for almost 75% of revenues. Dr. Reddy's deals in and manages all
the processes, from the development of the API to the submission of finished dosage
dossiers to the regulatory agencies.

CHAPTER – 2
COMPANY PROFILE

DR.REDDY’S LABORATORIES – A PROFILE
Dr. Reddy's Laboratories is an Indian multinational pharmaceutical company based
in Hyderabad, Telangana, India. The company was founded by Anji Reddy, who
previously worked in the mentor institute Indian Drugs and Pharmaceuticals limited,
of Hyderabad, India. Dr. Reddy's manufactures and markets a wide range of
pharmaceuticals in India and overseas. The company has over 190 medications,60
active pharmaceutical ingredients(APIs) for drug manufacture, diagnostic kits, critical
care, and biotechnology products.
Dr. Reddy's Laboratories.
Type Public
Traded as NSE: DRREDDY
BSE: 500124
NYSE: RDY
Industry Pharmaceuticals
Founded 1984
Founders Kallam Anji Reddy
Headquarters Hyderabad, Telangana, India
Key people G. V. Prasad (CEO)
Kallam Satish Reddy (Chairman)
Revenue ₹15,697.80 crore (US$2.4 billion) (2016)[1]
Net income ₹2,151.40 crore (US$330 million) (2016)[1]
Total assets ₹20,010.40 crore (US$3.1 billion) (2016)
Total equity ₹82.80 crore (US$13 million) (2016)
Number of employees 20,373 (April 2015)
Website www.drreddys.com

ADDRESS OF THE COMPANY:
Dr.Reddy’s laboratories ltd.
Registered address
8-2-337, Road no 3, Banjara Hills, Hyderabad 500034,
India.
VISION:
To become a discovery ruled global pharmaceutical company with a core purpose of
helping people lead healthier lives.
MISSION:
To be INDIA’s first pharmaceutical that successfully takes its products from
discovery to commercial launch globally.
BOARD OF DIRECTORS:
NAME DESIGNATION
Mr. Satish Reddy Chairman
Mr. G.V Prasad Co-Chairman & CEO
Mr. Bharat Narotam Doshi Independent Director
Mr. Anupam Puri Independent Director
Dr. Omkar Goswami Independent Director
Mr. Hans Peter Hasler Independent Director
Ms. Kalpana Morparia Independent Director
Dr. Bruce LA Carter Independent Director
Dr. Ashok Ganguly Independent Director
Mr. Sridar Iyengar Independent Director

KEY PRODUCTS:
Ciprofloxacin
Hydrochloride
Ramipril
Terbinafine HCI
Ibuprofen
Sertaline
Hydrochloride
Ranitidine HCI
Form 2
Naproxen
Sodium
Naproxen
Atorvastatin
Montelukast
Losartan Potassium
Sparfloxacin
Nizatidine
Fexofenadine
Ranitidine
Hydrochloride Form 1
Clopidogrel
Omeprazole
Finasteride
Sumatriptan
AWARDS AND RECONGNITIONS
 Best workplace in the Biotech/Pharmaceutical Industry – 2009.
 Gold shield –ICAI Awards for Excellence in Financial Reporting.
 Best CSR and Sustainability Practice 2008 – 9th
International Conference on
corporate governance and sustainability.
 HR Awards at world HRD congress
 Awards from Public Relations Society of India.
 RedituxTM – ‘’product of the year 2008’’
 AIF- Annual spring Award to Dr. K. Anji Reddy.

CHAPTER – 3
REVIEW OF LITERATURE
CASH FLOW CONCEPTUAL FRAME WORK

INTRODUCTION LITERATURE
Cash management is a broad term that refers to the collection, concentration and
disbursement of cash. It encompasses a company’s level of liquidity, its management
of cash balance and its short-term investment strategies. In some ways, managing cash
flow is the most important job of business managers.
-Tim Keller, Marc Goodhearted, David Wessels. 2005: About the cash analysis we
can say that it is the lifeblood of any business. In an organization we can see many
activities to get the cash from sales, debtors, sale of assets, investments etc. like this
the company spend also the cash in some areas- payment of salaries, rent dividend,
interest etc. lastly we can say that cash flow reveals the inflow and outflow of cash
during a particular period.
Cash flow is the difference between the amount of cash flowing in and out a
company. Make sure to consistently include the different types of cash flows.
-Keck, T, E. Levengood, and A. Longfield. 1998: The value of the equity can be
calculated by subtracting any outstanding debts from the total of all discounted cash
flows.
-Aswath Damodaran 2001 Investment Valuation: Calculating cash flows after the
forecast period is much more difficult as uncertainty and therefore the risk factor,
rises with each additional year into the future. The continuing value, or terminal
value, is a solution that represents the cash flow after the forecast period.
-Kubr, Marches, Ilar, Kienhuis. 1998. Starting up. McKinley & company: The
role played by cash flow statement in understanding the financial position of the
company is very much significant. Hence we need to know how the cash flow helps
the organization in resolving its financial crisis. Therefore, the analysis of cash flow
statement is selected for the study.

CASH FLOW STATEMENT- CONCEPTUAL FRAMEWORK
INTRODUCTION:
A statement which discloses the changes in position of cash and cash equivalents
between two periods .According to revised AS-3 issued by ICAI an organization
should prepare a cash flow statement and present it each period. Revised AS-3
DEALS with the provisions of information about changes in cash and cash
equivalents of an enterprise by means of cash flow statement.
MEANING:
Cash flow statement is a statement of changes in financial position of the firm on cash
basis.
It shows various sources (i.e. inflows) and applications (i.e. outflows) of cash during a
particular period and their net impact on the cash balance.
DEFINITIONS:
The institute of cost and works accountant of India defines cash flow statement as “a
statement setting out the flow cash under distinct heads of sources of funds and their
utilization to determine the requirements of cash during the given period and prepare
for its adequate provision”.
According to khan and Jain “cash flow statements are statements of changes in
financial position prepared on the bases of funds defined as cash or cash equivalents.

CASH FLOW IMPORTANT TERMS
 CASH AND CASH EQUIVALENTS:
As stated earlier, cash flow statement shows inflows and outflows of cash and cash
equivalents from various activities of an enterprise during a particular period. As per
AS-3, ‘Cash’ comprises cash in hand and demand deposits with banks, and ‘Cash
equivalents’ means short-term highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of changes
in value. An investment normally qualifies as cash equivalents only when it has a
short maturity, of say, three months or less from the date of acquisition. Investments
in shares are excluded from cash equivalents unless they are in substantial cash
equivalents. For example, preference shares of a company acquired shortly before
their specific redemption date provided there is only insignificant risk of failure of the
company to repay the amount at maturity. Similarly, short-term marketable securities
which can be readily converted into cash are treated as cash equivalents and is liquid
able immediately without considerable change in value.
 CASH FLOWS:
‘Cash Flows’ implies movement of cash in and out due to some non-cash items.
Receipt of cash from a non-cash item is termed as cash inflow while cash payment in
respect of such items as cash outflow. For example, purchase of machinery by paying
cash is cash outflow while sale proceeds received from sale of machinery is cash
inflow. Other examples of cash flows include collection of cash from trade
receivables, payment to trade payables, payment to employees, receipt of dividend,
interest payments, etc. Cash management includes the investment of excess cash in
cash equivalent Hence, purchase of marketable securities or short-term investment
which constitutes cash equivalents is not considered while preparing cash flow
statement.

FEATURES OF CASH FLOW STATEMENTS
 It is periodical statement as it covers a particular period of time, say month or
year.
 It shows moments of cash in between two balance sheet dates.
 It establishes the relationship between net profit and changes in cash position
of the firm.
 It does not involve matching of cost against revenue.
 It shows the sources and application of funds during particular period of time.
 It records the changes in fixed assets as well as current assets.
 It projected cash flow statement is referred to as cash budget.
 It is an indicator of cash earning capacity of the firm.
 It reflects clearly how financial position of firm changes over period of time
due to its operating activities, investing activities and financing activities.
CLASSIFICATION OF ACTIVITIES FOR THE PREPARATION OF CASH
FLOW STATEMENT
As per AS-3 these activities are to be classified into three categories.
 Operating Activities
 Investing Activities
 Financing Activities.
So as to show separately the cash flow generated or used by in these activities. This
helps users of cash flow statement to assess the impact of these activities on the
financial position of an enterprise and also on its cash and cash equivalents.

CASH FROM OPERATING ACTIVITIES:
Operating activities are the activities that constitute the primary or main activities of
an enterprise. For example, for a company manufacturing garments, operating
activities are procurement of raw material, incurrence of manufacturing expenses, sale
of garments, etc. These are the principal revenue generating activities (or the main
activities) of the enterprise and these activities are not investing or financing
activities. The amount of cash from operations’ indicates the internal solvency level
of the company, and is regarded as the key indicator of the extent to which the
operations of the enterprise have generated sufficient cash flows to maintain the
operating capability of the enterprise, paying dividends, making of new investments
and repaying of loans without recourse to external source of financing. Cash flows
from operating activities are primarily derived from the main activities of the
Enterprise. They generally result from the transactions and other events that enter
into the determination of net profit or loss. Examples of cash flows from operating
activities.
CASH INFLOWS FROM OPERATING ACTIVITIES
 Cash receipts from sale of goods and the rendering of services.
 Cash receipts from royalties fees, commissions, and other revenue.
 Cash outflows from operating activities
 Cash payments to suppliers of goods and services.
 Cash payment to and on behalf of the employees.
 Cash payment to an insurance enterprise for premium and claims, annuities
and other policy benefits.
 Cash payments of income taxes unless they can be specifically identified with
financing and investing activities.

CASH FROM INVESTING ACTIVITIES:
As per AS-3, investing activities are the acquisition and disposal of long-term assets
and other investments not included in cash equivalents. Investing activities relate to
purchase and sale of long-term assets or fixed assets such as machinery furniture, land
and building, etc. Transactions related to long-term investment are also investing
activities. Separate disclosure of cash flows from investing activities is important
because they represent the extent to which expenditures have been made for resources
intended to generate future income and cash flows. Examples of cash flows arising
from investing activities are:
CASH OUTFLOWS FROM INVESTING ACTIVITIES
 Cash payments to acquire fixed assets including intangibles and capitalized
research and development.
 Cash payments to acquire shares, warrants, or debt instruments of other
enterprises other than the instruments those held for trading purposes.
 Cash advances and loans made to third party( other than advances and loans
made by financial enterprise where in it is operating activities).
CASH INFLOWS FROM INVESTING ACTIVITIES
 Cash receipt from disposal of fixed assets including intangibles.
 Cash receipt from the repayment of advances or loans made to third parties
(except in case of financial enterprise).
 Cash receipt from disposal of shares, warrants, or debt instruments of other
enterprises except those held for trading purposes.
 Interest received in cash from loan and advances.
 Dividend received from investments in other enterprises.
.

CASH FROM FINANCING ACTIVITIES:
As the name suggests, financing activities relate to long-term funds or capital of an
enterprise, e.g., cash proceeds from issue of equity shares, debentures, raising long-
term bank loans, repayment of bank loan, etc. As per AS-3, financing activities are
activities that result in changes in the size and composition of the owners’ capital
(including preference share capital in case of a company) and borrowings of the
enterprise. Separate disclosure of cash flows arising from financing activities is
important because it is useful in predicting claims on future cash flows by providers
of funds (both capital and borrowings) to the enterprise. Examples of financing
activities are:
CASH INFLOWS FROM FINANCING ACTIVITIES
 Cash proceeds from issuing shares (equity and preference).
 Cash proceeds from issuing debentures, loans, bonds, and other short/long
Term borrowings.
CASH OUTFLOWS FROM FINANCING ACTIVITIES
 Cash repayments of amounts borrowed.
 Interest paid on debentures and long term loans and advances.
 Dividends paid on equity and preference capital.

RATIOS USED TO ANALYZE THE CASH FLOW STATEMENT
 OPERATING CASHFLOW RATIO:
The operating cash flow ratio is a measure of how well current liabilities are
covered by the cash flow generated from a company's operations. The operating cash
flow ratio can gauge a company's liquidity in the short term. Using cash flow as
opposed to income is considered a cleaner, or more accurate, measure since earnings
can be manipulated.
Operating cash flow ratio = Net cash flow from operating activities
Net sales
 ASSET EFFICIENCY RATIO:
Asset efficiency ratios are the key to analyzing how effectively and efficiency your
small business is managing its assets to produce sales. Asset efficiency ratios are also
called turnover ratios or management ratios. If you have too much invested in your
company's assets, your operating capital will be too high. If you don't have enough
invested in assets, you will lose sales and that will hurt your profitability, free cash
flow, and stock price.
Asset Efficiency Ratio = Net cash flow from operating activities
Total assets
 CURRENT LIABLITY COVERAGE RATIO
To test for solvency, this is a simple ratio. The more accurate method is to subtract
the cash used to pay off dividends as it will give a truer picture of the operating cash
flows. This ratio gives you an idea about the company’s debt management practices.
E.g. a value of 4.3 means that the current cash flows can pay for 4.3x the current
liabilities. The higher the number the better. If it drops below 1, then CFO is unable
to pay the current liabilities. It’s also a better indicator of the company’s ability to
pay current liabilities than the current ratio or quick ratio. This ratio is used to
analyze the short term stability of a company. This ratio also includes the current
maturing portion of long term debt.
Current liability coverage ratio = Net cash flow from operating activities
Current liabilities

LONGTERM DEBT COVERAGE RATIO
The long-term debt coverage ratio indicates whether a company can repay its existing
liabilities and take on additional debt without jeopardizing its survival. It is efficiency
metric, meaning it shows investors how adeptly a company manages its resources.
The metric equals net profit plus any non-cash expenses divided by the principal
amount of long-term debt. Accountants add non-cash expenses back to net profit
because these charges reduce net income, yet the borrowing firm does not disburse
any funds. An example is depreciation, which enables a firm to allocate its fixed-asset
costs over several years.
Long term debt coverage ratio= Net cash flow from operating activities
Long term debt
INTREST COVERAGE RATIO
The interest coverage ratio is a debt ratio or profitability ratio used to determine how
easily a company can pay interest on outstanding debt. The interest coverage ratio
may be calculated by dividing a company's earning before interest and
tax(EBIT) during a given period by the amount a company must pay in interest on its
debts during the same period.
Cash interest coverage ratio= CFO+ Taxes paid+ interest paid
Interest paid
EXTERNAL FINANCING INDEX RATIO:
This ratio compares the cash flow from financing activities with cash from operation
to show how dependent the company is on financing. The higher the number, the
more dependent the business is on external money.
External financing index ratio = cash from financing
Net cash flow from operating

CHAPTER – 4
DESIGN OF THE STUDY
NEED OF THE STUDY
OBJECTIVES OF THE STUDY
METHODOLOGY OF THE STUDY
CHAPTERZATION
LIMITATIONS

NEED OF THE STUDY:
Cash flow analysis measures how much cash is generated and spent by the business
during a given period. It is the best measure of the company’s performance.
Therefore, the role played by cash flow statement in understanding the financial
position of the company is very much significant. Hence, we need to know how the
cash flow helps the organization in resolving its financial crisis. Therefore, the
analysis of cash flow statement is selected for the study.
OBJECTIVES OF THE STUDY:
 Familiar with methodology for preparation of cash flow statement and different
components of cash flow statement.
 To find out the liquidity position of the company.
 To understand the types of transactions that result in cash flows from operating,
investing and financing activities.

METHODOLOGY OF THE STUDY:
Methodology is the general research strategy that outlines the way in which the
research is to be undertaken and among other things identifies the methods to be used
in it.
The data can be collected and analyzed with the help of ratios, diagram and charts
which help in arriving to a conclusion.
TYPE OF DATA USED:
This study is based entirely based on the secondary data.
SOURCES OF DATA COLLECTION:
 The data collected is from the following sources:
 Official website of Dr. Reddy’s Laboratories Ltd.
 Annual reports of Dr. Reddy’s Laboratories Ltd.
 Wikipedia.
PERIOD OF DATA USED:
The data collected and analyzed is for a period of past five years.
LIMITATIONS:
 The information is collected from secondary data.
 Only five years statements were taken into account for the study.
 Time as a limited factor.

CHAPTER – 5
ANALYSIS AND INTERPRETATION OF DATA

DATA ANALYSIS:
Data analysis is the process of inspecting, cleaning, transforming, and modeling data
with a goal highlighting useful information, suggesting conclusion, and supporting
decision making. Data Analysis involves converting a series of recorded observations
into descriptive statements and inferences about relationships. The types of analysis
that can be conducted depend on the nature of the measurement instrument and the
data collected method.
DATA INTERPRETATION:
Data interpretation is the process of assigning meaning to collected information and
determining the conclusions, significance, and implication of findings. The
interpretation of data is an important factor. Interpretation needs skill, intelligence and
foresightedness. The inherent imitation of data analysis should be kept in mind while
interpreting them. The impact of factors such as price level changes, changes in
accounting policies, window dressing, etc., should also be kept in mind when
accounting to interpret data.
FOR ANALYZING THE CASH FLOW STATEMENT OF DR.
REDDY’S LABORATORIES LIMITED FOLLOWING RATIOS
ARE BEING USED:
 Asset Efficiency Ratio
 Current Liability Coverage Ratio
 Operating Cash Flow Ratio
 External Financing Index Ratio
 Long Term Debt Coverage Ratio
 Current Ratio

TABLE: - 4.1 NET OPERATING CASHFLOW FOR 5 YEARS
YEAR 2016 2015 2014 2013 2012
Op Cash flow before change in WC 27519 26559 34726 24384 21404
Change in WC 4435 -3906
-
20241 -17738 -3436
Cash generated from Operations 31954 22653 14485 6646 17968
Income tax paid, Net -3972 -4792 -5430 -3758 -3938
Net cash from Operating activities 27982 17861 9055 2888 14030
CF from Net operating (CFO) 27982 17861 9055 2888 14030
(Source: Annual Report - www.drreddys.com )
Interpretation:
Table 1 shows that net operating cash flow in the year 2017 is higher (i.e. Rupees
27982) is lower in the year 2014 (i.e. Rupees 2888). The trend is increasing year by
year except in the year 2014 and 2015.

TABLE:- 4.2 NET SALES FOR 5 YEARS
YEAR 2016 2015 2014 2013 2012
Gross Sales 100060 99703 95777 81462 66443
Excise duty and others. -842 -829 -820 -718 -405
Net Sales 99218 98874 94957 80744 66038
Net sales 99218 98874 94957 80744 66038
(Source: Annual Report -www.drreddys.com)
Interpretation:
Net sale of the company is highest in the year 2017 is Rupees 99218, and lowest in
the year 2013 was Rupees 66038. Net sales of the company is exhibiting an increasing
trend from 2013-2017.

TABLE: -4.3 TOTAL ASSETS FOR 5 YEARS
YEAR 2017 2016 2015 2014 2013
Noncurrent Assets 74627 60527 56003 53638 54169
Current Assets 100949 104033 89078 66253 49237
Total Assets 175576 164560 145081 119891 103406
(Source: Annual Report -www.drreddys.com
Interpretation:
Total assets of the company highest in the year 2017 was Rupees 175576, and lowest
in 2013 was Rupees 103406. Hence total assets of the company in the past 5 years
reflects an upward trend.

TABLE: - 4.4
COMPUTATION OF OPERATING CASHFLOW RATIO
YEAR 2016 2015 2014 2013 2012
CF from Net
Operating (CFO) 27928 17861 9055 2888 14030
Net Sales 99218 98874 94957 80744 66038
CFO/Net sales
Op CF Ratio 0.281481 0.180644 0.095359 0.035767 0.212453
Interpretation:
The operating cash flow ratio is highest in the year 2017 i.e. 0.281481, lowest in the
year 2014 i.e. .035757. From 2014 to 2015 operating cash flow ratio decreasing trend,
but in the year 2017 there is sudden increase to 0.281481.

TABLE:-4.5
COMPUTATION OF ASSET EFFICIANCY RATIO
YEAR 2017 2016 2015 2014 2013
CF from Net Operating
(CFO) 27928 17861 9055 2888 14030
Total Assets 175576 164560 145081 119891 103406
CFO/Total Assets
Asset Efficiency ratio 0.159065 0.108538 0.062413 0.024089 0.135679
Interpretation:
Asset efficiency ratio in the year 2013 is lowest i.e. .024089, and is highest in the
year 2017 i.e. .159065. Compared to 2013 there is increasing trend in 2014, 2016 and
2017 respectively.

TABLE:- 4.6
CURRENT LIABLITY COVERAGE RATIO
YEAR 2017 2016 2015 2014 2013
CF from Net
Operating (CFO) 27928 17861 9055 2888 14030
Dividend Paid 4076 3574 2979 2708 2216
Current Liabilities 47987 46986 41142 40731 30623
CFO - Dividend
Paid 23852 14287 6076 180 11814
CFO-Dividend Paid/Current Liability
Current Liability
Coverage Ratio 0.497051 0.304069 0.147684 0.004419 0.385788
Source: Annual Report -www.drreddys.com)
Interpretation:
Current liability coverage ratio is highest in the year 2017 i.e. 0.497051, lowest in the
year 2014 i.e. 0.004419.it depicts that current liability coverage ratio is increasing
from 2015 to 2017.

TABLE :– 4.7
COMPUTATION OF LONGTERM DEBT COVERAGE RATIO
YEAR 2017 2016 2015 2014 2013
CF from Net
Operating(CFO) 27928 17861 9055 2888 14030
Dividend Paid 4076 3574 2979 2708 2216
LT Debt 9944 9391 9015 63 5130
CFO-Dividend Paid 23852 14287 6076 180 11814
CFO-Dividend/LT Debt
LT Debt Coverage Ratio 2.398632 1.52135 0.673988 2.857143 2.302924
INTERPRETATION:
Long term debt coverage ratio is highest in the year 2017 i.e. 2.398632, lowset in the
year 2015 i.e. 0.673988. long term debt coverage ratio is fluctuating in past 5 years.

TABLE:-4.8 COMPUTATION OF CURRENT RATIO
YEAR 2017 2016 2015 2014 2013
Current Assets 100949 104033 89078 66253 49237
Current
Liability 47987 46986 41142 40731 30623
Current Assets/Current Liability
Current Ratio 2.103674 2.214128 2.165135 1.626599 1.607844
Interpretation:
As we know that ideal current ratio of any firm is 2:1, It we see the current ratio of
the company is incresed during the five years period. the current ratio of the
company is more than the ideal ratio this depicts that the company’s liquidity position
is sound. Its current assets are more than current liablities.

TABLE: -4.9
COMPUTATION OF EXTERNAL FINANCING INDEX RATIO
YEAR 2017 2016 2015 2014 2013
CF from Net Operating
(CFO) 27928 17861 9055 2888 14030
CF from Financing (CFF) -6937 1894 282 1518 -1949
CFF/CFO
EFI Ratio -0.24839 0.106041 0.031143 0.525623
-
0.13892
Interpretation:
External efficiency ratio is highset in the year 2013(i.e.0 .525623), lowest in the year
2015 (i.e. .031143). External efficiency ratio fluctuating year by year in past 5 years.

TABLE :-4.10 NET CASH FROM FINANCING ACTIVITIES
YEAR CF From Financing Activities
2017 -6937
2016 1894
2015 282
2014 1518
2013 -1949
Interpretation:
Cashflow from financing activties of the company in the year 2013 rupees -1949. In
the year 2014 it increases to rupees 1518, in the year 2014 it decreases to rupees 282.
In the year 2016 it increses to rupees 1894, in the year 2017 it decreses to -6937. This
shows that cash from financing activities of the company is nagative in the year 2017
and 2013.

TABLE:- 4.11 COMBINED RESULT OF ABOVE COMPUTED RATIOS
YEAR 2017 2016 2015 2014 2013
Operating Cash Flow Ratio 0.281481 0.180644 0.095359 0.035767 0.212453
Asset Efficiency Ratio 0.159065 0.108538 0.062413 0.024089 0.013568
Current Liability Coverage Ratio 0.497051 0.304069 0.147684 0.004419 0.385788
Long Term Debt Coverage Ratio 2.398632 1.52135 0.673988 2.857143 2.302924
Current Ratio 2.103674 2.214128 2.165135 1.626599 1.607844
External Financing Index Ratio -0.24839 0.106041 0.031143 0.525623 -0.13892
Interpretation:
The overall ratios of the company are showed in the chart and the company is
achieving growth year by year.

CHAPTER – 6
CONCLUSION
FINDINGS
SUGGESTIONS

CONCLUSION
The present study on cash flow statements DR.REDDY’S LABORATORIES
LIMITED includes the analysis of cash flow ratios and such as current liability
coverage ratio, operating cash flow ratio, asset efficiency ratio, etc. which determine
the company’s financial position. It shows that Analysis of cash flow of the company
is achieving growth year by year. They are managing cash flow of the company in
very effective way.

FINDINGS:
 The current ratio has shown increasing trend as 1.607844, 1.626599, 2.16513,
and 2.214128 during 2013, 2014, 2015 and 2016 respectively but in the year
2017 slight decrease to 2.103674.
 Total assets of the company are increased from 2013 to 2017.
 Net sales of the company is also in increasing trend from 2013 to 2017,
Rupees 103406, 119891, 145081, 164560and 175576.
 Asset efficiency ratio is fluctuating year by year from 0.108535 to 0.281481 in
2016 and 2017.
 Current liabilities coverage ratio is decreased in 2014 to .004419 and
remaining year it is increasing constantly.
 Cash flow from financing activities is negative in 2017 and 2013, is Rupees -
6937 and -1949 respectively. In other years it is rupees
 Operating cash flow ratio is fluctuating year by year from 2013 to 2017.

SUGGESTIONS
 The company must lower the external financing index ratio to minimize the
dependency on external finance.
 Current liability coverage ratio of the company below 1 for the past years. So
it is advised to increase the CLCR above 1.
 The company has to use its assets to generate more cash flow.
 Cash flow from net operating is increasing from past 5 years, except in the
year 2014.company should be planned in a way that it should increase on
yearly basis.
 Long term debt coverage ratio is high in some of the year, higher the number
the more cash from operation is required to pay off debt. So it is advised to
maintain lower number of long term debt coverage ratio.

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