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Cash Flow


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Cash Flow

  1. 1. Cash Flow Statement - Analysis Bharti Airtel Limited
  2. 2. Agenda <ul><li>Briefly describe a Cash Flow Statement and its contents </li></ul><ul><li>Present the Cash Flow Statement given by Bharti Airtel Limited in their Annual Report 2008-09 </li></ul><ul><li>Provide a detailed analysis </li></ul><ul><li>Answer a few questions relevant to Cash Flow Statements. </li></ul>
  3. 3. Importance of Cash Flow Statement <ul><li>Cash Flow Statement </li></ul><ul><ul><li>Depicts the cash generated and utilized by the company </li></ul></ul><ul><ul><li>Provides information on a firm’s liquidity and solvency </li></ul></ul><ul><ul><li>Provide additional information for evaluating changes assets, liabilities and equities </li></ul></ul><ul><li>Operating Activities </li></ul><ul><ul><li>Principal revenue producing activities of the company </li></ul></ul><ul><li>Investing Activities </li></ul><ul><ul><li>Acquisition and disposal of long term assets and other investments </li></ul></ul><ul><li>Financing Activities </li></ul><ul><ul><li>Activities resulting in change in the size and composition of the share capital and borrowings of the company </li></ul></ul>
  4. 4. Cash, Cash Equivalents and Cash Flows <ul><li>Cash </li></ul><ul><ul><li>Cash on hand </li></ul></ul><ul><ul><li>Demand deposits with banks </li></ul></ul><ul><li>Cash Equivalents </li></ul><ul><ul><li>Short term, highly liquid investments </li></ul></ul><ul><ul><li>Readily convertible into known amounts of cash </li></ul></ul><ul><ul><li>Subject to insignificant risk of change in value </li></ul></ul><ul><li>Cash Flows </li></ul><ul><ul><li>Inflows and Outflows of cash and cash equivalents </li></ul></ul>
  5. 5. Cash Flow from Operating Activities
  6. 6. Cash Flow from Investing Activities
  7. 7. Cash Flow from Financing Activities
  8. 8. General Features <ul><li>Prepared for the year ended 31 st March, 2009 and thus covers the effects of all cash transactions of the financial year 2008-09 </li></ul><ul><li>The cash flow has been classified into 3 categories, namely Operating, Investing and Financial Activities </li></ul><ul><li>Comparative position of each element of the CFS for the previous year also disclosed </li></ul><ul><li>Names of CMD, CEO, CFO and CS of the company mentioned </li></ul><ul><li>CFS signed by the partners of Auditing firm, S. R. Batliboi and Associates </li></ul>
  9. 9. Sources of cash <ul><li>Sale of fixed assets </li></ul><ul><li>Sale of investments </li></ul><ul><li>Equity dilution of subsidiary company </li></ul><ul><li>Interest received </li></ul><ul><li>Proceeds from maturity of FD </li></ul><ul><li>ESOP </li></ul><ul><li>Receipts from short term and long term borrowing </li></ul><ul><li>Cash and cheques in hand </li></ul>
  10. 10. Application of cash <ul><li>Fixed assets </li></ul><ul><li>Investments </li></ul><ul><li>Fixed deposits </li></ul><ul><li>Acquisition, subscription, investment in subsidiaries/associates </li></ul><ul><li>Provisions for bad debts , deferred bonus , gratuity etc </li></ul>
  11. 11. Analysis of Operating Activities <ul><li>Increase in provision for bad and doubtful debts, inventory for damaged stock, wealth tax, gratuity, deferred bonus. </li></ul><ul><li>Company has raised the amount for overall provision which may be the inference of company’s sounder financial position for this year compared to previous year. </li></ul>
  12. 12. Analysis of Investing Activities <ul><li>Purchases of Fixed Assets increased by 23% over previous year </li></ul><ul><li>Amount spent on Investments has increased to Rs.393,572,466(08-09) from Rs.221,274,149(07-08) that is a rise of 77% </li></ul><ul><li>The proceeds from sale investments has increased by 139.9% i.e. the company has liquidated more of its investments in comparison to last year </li></ul><ul><li>The company has diluted the equity of its subsidiary company and raised an amount of over Rs.1 billion </li></ul><ul><li>The investment into the purchases of fixed deposits this year has been more than Rs. 14 Billion compared to nil last year </li></ul><ul><li>There has been a reduction in the amount of money invested in acquiring the subsidiaries </li></ul>
  13. 13. Analysis of Investing Activities <ul><li>The increase in sale of fixed assets along with increase in purchase of the same indicates that the company wants to use newer technology thereby providing better service to the customer to increase the customer base. </li></ul><ul><li>The increase in sale and purchase of investments and purchase in FD also indicates that the company wants to grow by investing more so that it can have more to invest in operating activities. </li></ul>
  14. 14. Analysis of Financial Activities <ul><li>Cash and Cash Equivalents for the current year are Rs.13,044,515(08-09). This has almost doubled in comparison to last year. </li></ul><ul><li>The company has increased the amount of money that it has deposited with scheduled banks. The amount is more than 5 times that of the previous year. </li></ul><ul><li>The net cash generated from financing activities has however fallen down from Rs.59,987,215 in 07-08 to Rs.20,648,497 in 08-09.This maybe due to less issue of share capital this year as compared to last year. </li></ul><ul><li>The inflow in the cash equivalents has been quite high. It has increased to Rs.6,010,448 as compared to an outflow of Rs.1,095,663 last year. </li></ul>
  15. 15. Some relevant Q and A <ul><li>How much cash has been generated from normal business operating activities of the company? </li></ul><ul><li>Answer: Rs. 137,115,633,000 </li></ul><ul><li>Same as cash from operating activities </li></ul><ul><ul><li>After basic adjustments in Net profit before tax </li></ul></ul><ul><ul><li>After adjustments for changes in working capital </li></ul></ul><ul><ul><li>After taxes </li></ul></ul>
  16. 16. Some relevant Q and A <ul><li>What have been the premier financing activities of the firm through which cash has been raised? </li></ul><ul><li>Answer: </li></ul><ul><ul><li>Fresh Issue of share capital </li></ul></ul><ul><ul><li>Issue of shares under ESOP scheme </li></ul></ul><ul><ul><li>Long term borrowings </li></ul></ul><ul><ul><li>Cash Credit facilities and Short term loans </li></ul></ul>
  17. 17. Some relevant Q and A <ul><li>What has happened to the cash so obtained? </li></ul><ul><li>Answer: </li></ul><ul><ul><li>Purchase of fixed assets </li></ul></ul><ul><ul><li>Purchase of investments </li></ul></ul><ul><ul><li>Purchase of Fixed Deposits </li></ul></ul><ul><ul><li>Redemption of long term borrowings </li></ul></ul><ul><ul><li>Redemption of short term borrowings </li></ul></ul><ul><ul><li>Interest </li></ul></ul>
  18. 18. Some relevant Q and A <ul><li>How much cash has been spent on investing activities like purchase of new plant and equipments? </li></ul><ul><li>Answer: Rs. 577,077,257,000 </li></ul><ul><li>Includes </li></ul><ul><ul><li>Purchase of fixed assets </li></ul></ul><ul><ul><li>Purchase of investments </li></ul></ul><ul><ul><li>Purchase of Fixed Deposits </li></ul></ul>
  19. 19. Some relevant Q and A <ul><li>How was the redemption of preference shares and debentures accomplished? </li></ul><ul><li>Answer: </li></ul><ul><ul><li>Debenture redemption reserve value reduced from 553581 to 139958 </li></ul></ul><ul><ul><li>Debentures have been redeemed by greater amount </li></ul></ul><ul><ul><li>Indicates improved financial situation of the company </li></ul></ul>
  20. 20. Some relevant Q and A <ul><li>Is the cash balance at the end of the year adequate with respect to the external borrowings made by the firm ? </li></ul><ul><li>Answer: Yes </li></ul><ul><li>Proceeds from long term borrowings </li></ul><ul><ul><li>Receipts- Rs 27,462,693,000 </li></ul></ul><ul><ul><li>Payments –Rs 15,288,260,000 </li></ul></ul><ul><ul><li>Net balance-Rs 12,174,433,00 </li></ul></ul><ul><li>Cash balance at the end- Rs 13,044,515,000 </li></ul>
  21. 21. Some relevant Q and A <ul><li>Are long term sources of cash (generated internally and externally) adequate to finance purchase of new fixed assets? </li></ul><ul><li>Answer: No </li></ul><ul><li>Purchase of fixed assets – Rs. 168.59 Billion </li></ul><ul><li>Long term sources of cash </li></ul><ul><ul><li>Fresh Issue of share capital </li></ul></ul><ul><ul><li>Issue of shares under ESOP </li></ul></ul><ul><ul><li>Long term borrowings </li></ul></ul><ul><ul><li>Total – Rs. 27.79 Billion </li></ul></ul>
  22. 22. Some relevant Q and A <ul><li>What has been the proportion of debt and equity for cash raised from outside? </li></ul><ul><li>Debt – </li></ul><ul><ul><li>Receipts – Rs. 27,462,693,000 </li></ul></ul><ul><ul><li>Payments – Rs. 15,288,260,000 </li></ul></ul><ul><ul><li>Net – Rs. 12,174,433,000 </li></ul></ul><ul><li>Equity – </li></ul><ul><ul><li>Fresh Issue of Share Capital – Rs. 149,400,000 </li></ul></ul><ul><ul><li>Issue of shares under ESOP – Rs. 176,058,000 </li></ul></ul><ul><ul><li>Total – Rs. 325,458,000 </li></ul></ul><ul><li>Debt-Equity Ratio – 37.4:1 </li></ul>
  23. 23. Some relevant Q and A <ul><li>Why are dividends not larger? </li></ul><ul><li>Answer: Increase in </li></ul><ul><ul><li>Purchase of fixed assets </li></ul></ul><ul><ul><li>Purchase of investments </li></ul></ul><ul><ul><li>Purchase of FDs </li></ul></ul><ul><ul><li>Provision for bad/doubtful debts </li></ul></ul><ul><ul><li>Depreciation </li></ul></ul><ul><ul><li>Interest expenses </li></ul></ul><ul><ul><li>Tax paid </li></ul></ul>
  24. 24. Cash Flow from Operating Activities
  25. 25. Some relevant Q and A <ul><li>Is the company borrowing to pay cash dividends? </li></ul><ul><li>Answer: Yes </li></ul><ul><ul><li>The amount of cash required in various investments is much more than what is being generated </li></ul></ul><ul><ul><li>Hence additional borrowings to fund the dividends is required </li></ul></ul>
  26. 26. Some relevant Q and A <ul><li>Has the liquidity position of the company improved? </li></ul><ul><li>Answer: Yes </li></ul><ul><ul><li>Working capital after adjustments/Net cash from operating activities has increased on Y-to-Y basis </li></ul></ul>
  27. 27. Thank You <ul><li>References: </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>Financial Accounting for Management, Ambrish Gupta, Pearson Education </li></ul></ul><ul><li>Prepared and Presented by: </li></ul><ul><ul><li>Ankita Maheshwari – 91007 </li></ul></ul><ul><ul><li>Ankur Sharma – 91008 </li></ul></ul><ul><ul><li>Mayank Sharma – 91031 </li></ul></ul><ul><ul><li>Nikhil Soni – 91038 </li></ul></ul><ul><ul><li>Pragati Saraf – 91040 </li></ul></ul><ul><ul><li>Dhruval Dholakia - 91043 </li></ul></ul>