Analysis of Funds Flow Statement

CHAPTER 1
INTRODUCTION
FINANCE:
Finance may be defined as the provision of money at the time when it
is required. Finance refers to the management of flows of money through an
organization, it concerns with the application of skills in the manipulation,
use and control of money. Different authorities have interpreted the term
finance differently. However, there are three main approaches to finance:
The first approach views finance as to providing of funds needed by a
Business on most suitable terms. This approach confines finance to
the raising of funds and to the study of financial institutions and
instruments from where funds can be procured.
The second approach relates finance to cash.
The third approach views finance as being concerned with rising of
funds and their effective utilization.
The term finance was interrupted to mean the procurement of funds
by corporate enterprises to meet the financing needs. The term
procurements were used in a bread sense include the whole gamut of raising
the funds externally.

K.L.E. Societys Academy of Business Management

Analysis of Funds Flow Statement

FINANCIAL MANAGEMENT:
Financial management refers to that part of the management activity,
which is concerned with planning, & controlling of firms financial recourses
of raising funds for the need of the business, appropriate employment of
funds there of and all business has financial management is applicable to
every type of organization, irrespective of size kind of nature.

FUNDS:
In a narrow sense, fund means cash only. In a broader sense, it refers
to money values in whatever form it may exist. In a popular sense, it means
working capital, i.e., the excess of current asset over current liabilities.

FLOW OF FUNDS:
The term flow means movement and includes both inflow and
outflow. The flow of funds occur when a transaction changes on the one
hand a non-current account and on the other a current account and viceversa.

FUNDS FLOW STATEMENT:

In every concern, the funds flow in from different sources and
similarly funds are invested in various sources of investment.

K.L.E. Societys Academy of Business Management

Analysis of Funds Flow Statement

It is continuous process. The study and control of this funds-flow
process (i.e., the uses and sources of funds) is the main objective of financial
management to assess the soundness and the solvency of the enterprise.
The funds-flow-statement is a report on financial operations changes,
flow or movements during the period. It is a statement which shows the
sources an application of funds or it shows how the activities of a business
are financed in a particulate period. In other words, such a statement shows
how the financial resources have been used during a particular period of
time. It is, thus, a historical statement showing sources and application of
funds between the two dates designed especially to analyze the changes in
the financial conditions of an enterprise.
In the words of Foulke, it isA statement of Sources and Application of Funds is a technical
device designed to analyze the changes in the financial condition of a
business enterprises between two dates.
Various titles are used for this statement such as 'Statement of sources
and Application of Funds', 'Summary of Financial operations,' 'Changes in
Financial Position', 'Fund received and Disbursed', 'Funds Generated and
Expended', Changes in Working Capital, Statement of Fund' etc. Title of
Funds Flow Statement has been modified from time to time. Really it is
very difficult to find a short time for such statement which carries much to
the readers regarding its contents and functions.

K.L.E. Societys Academy of Business Management

Analysis of Funds Flow Statement

SOURCES OF FUNDS:
Transactions that increase working capital are sources of funds.
Some of them are: (1)

Funds from Operations.

(2)

Funds from issue of Share Capital.

(3)

Funds from Issue of Debentures, Acceptance of Public Deposits and

other Long-term Loans.

(4)

Sale of Fixed Assets.

APPLICATION OF FUNDS:
The following are application of funds
(1)

Loss from operations. Loss from operations either decreases the

current assets or increases the current liabilities or in other words reduces the
funds. It may either be shown as application of funds in the Funds Statement
or as a reduction in sources of funds.
(2)

Purchase of Fixed Assets. If any fixed asset like building, machinery,

furniture or investments is purchased, it will reduce the current asset (cash)

without any corresponding decrease in current liability. It is, thus, an
application of funds. Purchase of asset against issue of share capital is not
application of funds.
(3)

Repayment of loans, Redemption of Debentures or preference share

capital. Any such repayment including the payment of premium on

redemption of debentures or preference shares is an application of funds
because it reduces the current assets.

K.L.E. Societys Academy of Business Management

Analysis of Funds Flow Statement

(4)

Payment of Dividend. Payment of dividend (and not proposed

dividend) is an application of fund if paid in cash. If bonus shares are issued,

it shall not be treated application of funds.
(5)

Other Applications. Any loss such as embezzlement, compensation,

donations etc. involving cash, is an application of fund.

(6)

Increase in Working Capital. Increase in working capital (as per

schedule of changes in working capital) represents investment in current

assets hence it is an application of funds. In other words, the excess of
sources over application of funds is increase in working capital.

FUNDS FROM OPERATIONS:

Sales are the major sources of cash-inflow an at the same time cost of
goods sold and expenses are the main sources of cash-outflow.
The difference of these two [i.e., Sales-(cost of goods sold +
expenses)] is net profits or net income from operations. Such income from
operation differs from the net profits shown by the profit and loss account
because profit and loss account incorporates certain items which do not
affect the flow (inflow or outflow) of funds. Profit and loss account is,
therefore, adjusted accordingly in order to calculate the profits from
operations.

K.L.E. Societys Academy of Business Management

Analysis of Funds Flow Statement

WORKING CAPITAL:
Working capital means the excess of current assets over current
liabilities. Statement of changes in working capital is prepared to show the
changes in the working capital between the two balance sheet dates. This
statement is prepared with the help of current assets and current liabilities
derived from the two balance sheets.

OBJECTIVES (OR IMPORTANCE) OF FUNDS FLOW

STATEMENT:
Funds Flow Statement is an analytical tool in the hands of financial
manager. The basic purpose of this statement is to indicate on historical basis
the changes in the working capital i.e., where funds came from and were
there are used during a given period.
The utility of this statement can be measured on the basis of its
contributions to the financial management. It generally serves the following
purposes:(1)

Analysis of Financial Position. The basic purpose of preparing the

statement is to have a rich into the financial operations of the concern. It

analyses how the funds were obtained and used in the past. In this sense, it
is a valuable tool for the finance manager for analyzing the past and future
plans of the firm and their impact on the liquidity. He can deduce the
reasons for the imbalances in uses of funds in the past a take necessary
corrective actions. In analyzing the financial position of the firm, the Funds
Flow Statement answers to such questions as-

K.L.E. Societys Academy of Business Management

Analysis of Funds Flow Statement

Why were the net current assets of the firm down, though the net
income was up or vice versa?
How was it possible to distribute dividends in absence of or in excess
of current income for the period?
How was the sale proceeds of plant and machinery used?
How was the sale proceeds of plant and machinery used?
How were the debts retired?
What became to the proceeds of share issue or debenture issue?
How was the increase in working capital financed?
Where did the profits go?
Though it is not an easy job to find the definite answers to such
questions because funds derived from a particular source are rarely used for
a particular purpose. However, certain useful assumptions can often be
made and reasonable conclusions are usually not difficult to arrive at.
(2)

Evaluation of the Firm's Financing. One important use of the

statement is that it evaluates the firm' financing capacity. The analysis of

sources of funds reveals how the firm's financed its development projects in
the past i.e., from internal sources or from external sources. It also reveals
the rate of growth of the firm.
(3)

An Instrument for Allocation of Resources. In modern large scale

business, available funds are always short for expansion programmes and
there is always a problem of allocation of resources. It is, therefore, a need

K.L.E. Societys Academy of Business Management

Analysis of Funds Flow Statement

of evolving an order of priorities for putting through their expansion
programmer which are phased accordingly, and funds have to be arranged as
different phases of programmer get into their stride. The amount of funds to
be available for these projects shall be estimated by the finance with the help
of Funds Flow Statement. This prevents the business from becoming a
helpless victim of unplanned action.
(4)

A Tool of Communication to Outside World. Funds Flow Statement

helps in gathering the financial states of Business. It gives an insight into

the evolution of the present financial position and gives answer to the
problem 'where have our resources been moving'? In the present world of
credit financing, it provides a useful information to bankers, creditors,
financial, it provides a useful informations and government etc. regarding
amount of loan required, its proposes, the terms of repayment an sources for
repayment of loan etc. The financial manager gains a confidence born out of
a study of Funds Flow Statement. .
(5)

Future Guide. An analysis of Funds Flow Statements of several years

reveals certain valuable information for the financial manager for planning
the future financial requirements of the firm and their nature too i.e. Short
term, long-term or mid term. The management can formulate its financial
policies based on information gathered from the analysis of such statements.
Financial manager can rearrange the firm's financing more effectively on the
basis of such information along with the expected changes in trade p

K.L.E. Societys Academy of Business Management

Analysis of Funds Flow Statement

payables and the various accruals. In this way, it guides the management in
arranging its financing more effectively.

LIMITATIONS OF FUNDS FLOW STATEMENT:

The fund flow statement has a number of uses; however, it has certain
limitations also, which are listed below:
It should be remembered that a funds flow statements is not a
substitute of an income statement or a balance sheet. It provides only
some additional information as regards changes in working capital.
It cannot reveal continuous changes.
It is not an original statement but simply are-arrangement of data
given in the financial statements.
It is essentially historic in nature and projected funds flow statement
cannot be prepared with much accuracy.
Changes in cash are more important and relevant for financial
management than the working capital.

K.L.E. Societys Academy of Business Management

Analysis of Funds Flow Statement

CHAPTER 2
RESEARCH METHODOLOGY
MEANING OF PROJECT:
A Project is a scientific study of real issue or a problem intended to
resolve the problem with application of management concepts and skills.
The study can deal with a small or a big issue in a division or an
organization. The problem can be from any discipline of management. It can
even be a case study where a problem has been dealt with through the
process of management. The essential requirement of a project is that it
should entail scientific collection, analysis and interpretation of data leading
to valid conclusion.

NECESSARY OF PROJECT:
Project work is the best way to practice what you have learnt. The
purpose of including project report in the Bachelor/Master degree program is
to provide you an opportunity to investigate a problem applying
management concepts in a scientific manner. It enables you to apply your
conceptual knowledge in a practical situation and to learn the art of
conducting a study in a systematic way and presenting its findings in a
coherent report. As managers, you are constantly seeking information to
K.L.E. Societys Academy of Business Management

10

Analysis of Funds Flow Statement

base your decisions. How will you collect, synthesize and make the data
meaningful, is what you learn through this process.

STATEMENT OF PROBLEM:
As a statutory obligation, every organization has to prepare financial
statements at end of each financial year to know the exact financial position
or the profit position and the capital growth of the organization. The
financial statement like P&L account and Balance sheet gives a summary of
companys resources, profits or losses at a particular period of time. These
statements exhibit the financial events occurred in a given period of time.
From this point of view the financial statements fulfills the objective of
organization very well.
But there are certain important financial matters, which can be known
only through analysis of these financial statements. Thus, it is important to
know what funds are available during the period. This underlines the
importance of statement prepared to report movement of funds. Thus the
problem taken for study FUND FLOW ANALYSIS.

TITLE OF THE STUDY:

An analysis and study of funds flow statement at Karnataka Soaps and
Detergents Limited. (Bangalore).
K.L.E. Societys Academy of Business Management

11

Analysis of Funds Flow Statement

SCOPE OF THE STUDY

The project contains the profile of the company i.e. KS&DL where the
project work was undertaken. It contains details regarding how working
capital is managed at KS&DL and also where fund comes & gone statements
at KS&DL.
This study gives the information about financial aspects of KS&DL
from to 2003 to 2008. This study was done in the time duration of 2 weeks
from the information provided by concerned officials of KS&DL.
The study has employed three important aspects in order to analyze
the utilization and application of funds, with the help of various graphs.
Funds flow statement
Working capital statement
Ratio analysis
Current ratio
Turnover ratio
Liquid ratio

NEED OF THE STUDY:

In this rapidly changing, the role financial statements also have
undergone considerable change. Funds constitute the prime importance in
starting and operating any business enterprise. The need for maintaining the

K.L.E. Societys Academy of Business Management

12

Analysis of Funds Flow Statement

financial chastity of business operations, ensuring the reliability of recorded
experience resulting from these operations and conducting a frank appraisal
of such experience has made accounting a prime activity along with such
other activities as marketing and production.
So, it has been the salient features of the evolution of accounting
theory and practice that the preparation of final accounts and statements is
undertaken with the object of providing as much as information as possible
for public gaze. From this point of view, it is important to know the uses
and application of funds in any business enterprise.
A study of funds flow analysis is of major importance to internal and
external analysis because it reflects the position of the company in items of
finance. Excess or inadequate working capital or funds can result in the loss
of the company or reduce the profits of the company, which it could earn
otherwise. Bott excessive and inadequate capital is dangerous from the
firms point of view. Thus, it is just as important to know what assets and
liabilities exist and as well as what profit has been made because the conduct
of a business involves a flow of funds into operating assets and then back to
funds again.

OBJECTIVES OF THE STUDY

To determine the exact financial position of KS&DL in the capital
market.
To study the allocation of funds and working capital in the KS&DL.
K.L.E. Societys Academy of Business Management

13

Analysis of Funds Flow Statement

To compare the various uses and applications of funds with the
previous years.
To determine the financial consequences of KS&DL operations.
To have a brief account of operation and position of KS&DL.
To get an idea of the practical application of the term working capital
and funds flow statement, whose theoretical aspects was known to us
in the past.
To know the business policies, systems and procedures followed to
manage funds at KS&DL.
To prepare and analyze sources and application of funds and statement
of changes in working capital.
To study the management of inventories, account receivables and cash
in KS&DL.
To suggest some work instructions regarding the defect in the working
capital and funds if any.
To study the ratio analysis of KS&DL.
To study the liquidity of assets used. The ratio relating to the liquidity
speaks about, how easy the assets can be converted in to cash.
To know the operating efficiency of various assets.
To study in detail the reasons for ups and downs in working capital
position, by studying variations in individual assets. This also
indicates how productively the resources are applied.

K.L.E. Societys Academy of Business Management

14

Analysis of Funds Flow Statement

RESEARCH METHODOLOGY:
The chief criteria for the validity of any research study lies in its
methodology. An enquiry would prove a failure if it is not done along certain
methodical lines.
The method of study adapted to carryout the project work is mainly
through personal enquiry with the Accounts Manager. The study comprises
of the companys operations and the techniques followed by them.
The data extracted from the annual reports of the company was analyzed and
further reduced to tables. To make it pictorial and easier to grasp and
understand the data was represented in graphical forms.
This is the study entirely based on:
Personal discussion.
Annual reports of K.S.D.L.
Published sources.
Simple statistical analyses.

SOURCES OF DATA:
K.L.E. Societys Academy of Business Management

15

Analysis of Funds Flow Statement

The source of the data collected for this study could be broadly
classified into two categories.

PRIMARY DATA:
The tools used for primary data collections are purely based on
personal enquiry with the executives and staff of the entire department
including finance dept for collecting data about the company. This enquiry
was done in order to achieve and collect much information to make the
project more effective.
SECONDARY DATA:
The secondary data has been collected from various published sources
like journals, magazines etc. It is also obtained from published sources like
annual reports, company profile, books of accounts, other relevant textbook
etc.

LIMITATIONS:
Study of funds flow statements is limited to the information gathered
through the enquiry and discussions with the company officials and
executives.
The period of study was very less.
Inter firm and intra firm comparison is not possible.
K.L.E. Societys Academy of Business Management

16

Analysis of Funds Flow Statement

Analysis of the study was dependent only on the information provided
by the organization.
Cost limit.

CHAPTER 3

COMPANY PROFILE

INTRODUCTION TO SOAP INDUSTRY:

Soap is one of the commodities, which has become an indispensable
part of life of the modern fantasy world. Since it is non-durable consumer
goods, there is a large market for it. The whole soap industry is
experiencing changes due to innumerable reasons such as Government
relations, environment, toxicological allergy problems, increase in cost of
raw material etc.
The changing technology and even existing desire by the individuals
and the organization to produce a better product at a mere economical rate
has also acted as Catalyst for the dynamic process of change. More and more
Soap manufactures are trying to capture a commanding market share by
introducing and maintaining acceptable products. The soap industry in India

K.L.E. Societys Academy of Business Management

17

Analysis of Funds Flow Statement

faces a cutthroat Competition, while multinational companies dominate the
market.
Indian Soap industry has seen several ups and downs in the last 30 to
40 years. In the year 1964, during the China war India faced severe shortage
of fats due to foreign exchange Crisis.
Following Swadeshi movement in 1905, few more factories were set
up and they were:
1.

Mysore Government Soap factory at Bangalore.

2.

Godrej Soaps at Bombay.

THE INDIAN SOAP INDUSTRY SCENARIO:

The Indian soap industry has been dominated by handful of
companies such as
1.

Hindustan Levers Limited.

2.

Tata Oil Mills (Taken over by HLL)

3.

Godrej Soaps Private Limited.

The Indian Soaps industry continued to flourish very well until 1967-68,

but began to stagnate. Soon it started to recover and experienced a short

upswing in 1974. This increase in demand can be attributed to:1.

Growth of population.

2.

Income and consumption increase.

3.

Increase in urbanization

K.L.E. Societys Academy of Business Management

18

Analysis of Funds Flow Statement

4.

Growth in degree of personal hygiene.

A soap manufacturer has 2 Classifications, Organized and unorganized

sector. KSDL is under organized Sector.

PRESENT STATUS:
MARKET SCENARIO
India is the ideal market for cleansing products. The countrys Per
capita consumption of detergent powders and bars stands at 1.6 Kg and soap
at 543gms. Hindustan Lever, which towers over the cleaning business, sells
in all over the cleaning business but the tiniest of Indian settlements.

PROBLEMS OF SOAPS & DETERGENTS INDUSTRY:

Industry faces some problems due to increase in the cost of raw
materials. The major ingredients like soda ash, Linear alkyl benzene and
Sodium tripoly phosphate poses number of serious problems in terms of
availability. The demand and supply gap of vegetables oil is 1.5 to 2 Lakhs
tons and is met through imports.

HISTORY:
India is a rich land of forest; ivory, silk, sandal, precious gems are
magical charms of centuries. The most enchanting perfumes of the world
got their exotic spell with a twist of sandal. The worlds richest sandalwood

K.L.E. Societys Academy of Business Management

19

Analysis of Funds Flow Statement

resource is from one isolated stretch of forests land in South India that is
Karnataka.
The origin of sandalwood and its oil in Karnataka, which is used in
making of Mysore sandal soaps, is well known as Fragrant Ambassador of
India & Sandalwood oil is in fact known as Liquid Gold.
By the Inspiration of His Highness Maharaja of Mysore late
Jayachamarajendra Wodeyar, the trading of sandalwood logs started which
was exported to Europe and New destinations, but with commencement of
First world War India faced Severe Crisis on the business of sandalwood.
This situation gave rise to start of an industry, which produces value
added products i.e., of Sandalwood oil. His Highness Maharaja of Mysore
created this situation as an opportunity by sowing the seed of the
Government Sandalwood Oil Factory, which is the present KS&DL. The
project was shaped with the engineering skills and expertise of the top level.
Late Sir M.Visvesvaraya, the great Engineer was the man behind the project.
Todays famous Mysore sandal soaps credit goes to late Sri Sosale
Garalapuri Shastri who incorporated the process of soap making using
Sandalwood oil. He was an eminent scientist in the field working at the Tata
Institute, Bangalore. He was sent to England to master the fine aspects of
soap manufacturing.

K.L.E. Societys Academy of Business Management

20

Analysis of Funds Flow Statement

The Maharaja of Mysore & Diwan Sir. M.Visvesvaraya established
the Government Soap factory during the year 1918. The factory was started
as a very small unit near K.R.Circle, Bangalore with the capacity of 100 tons
P.A. In November 1918 the Mysore sandal soap was put into the market
after sincere effort and experiments were undertaken to evolve a soap
perfume blend using sandalwood oil as the main base to manufacture toilet
soap. The factory shifted its operation to Rajajinagar industrial area,
Bangalore in July 1957, where the present plant is located. The plant
occupies an area of 39 acres (covering Soaps, Detergents and Fatty Acid
divisions), on the Bangalore Pune Highway, easily accessible by transport
services and communication. Another sandal wood oil division was
established during the year 1944 at Shimoga, which stopped its operations in
the year 2000 for want of Natural Sandalwood.
This factory started at a moderate scale in year 1916. The first product
was washing soap in addition to the toilet soap in the year 1918. The toilet
soap of the company was made up of sandal wood oil.
In 1950 Government decided to expand the factory in two stages. The
first stage of expansion was done to increase the output to 700 tons per year
and was completed in the year 1952 in the old premises.
The next stage of expansion was implemented in 1954 to meet
growing demand for Mysore sandal soap and for this purpose Government
of India sanctioned license to manufacture 1500 tons of Soaps and 75 tons of

K.L.E. Societys Academy of Business Management

21

Analysis of Funds Flow Statement

glycerine per year. The expansion project worth of Rs.21 lakhs includes the
shifting of the factory to a newly laid industrial suburban of Bangalore.
The factory started functioning in this new premise [i.e., present one]
from 1st July 1957. From this year onwards till date the factory had never
looked back, it has achieved growth and development in production scales
and profits.
The industry has 2 more divisions one at Shimoga and another at
Mysore where sandal wood oil is extracted. The Mysore division
functioning from 1970 and only during 1984 manufacturing of perfumed and
premiere quality Agarbathies at Mysore division was started. Right from the
first log of sandalwood that rolled into the boiler room in 1916, the company
has been single minded pursuit of excellence. The project took shape with
the engineering skills and expertise of top-level team under the leadership of
Sir. M.Visvesvaraya, Prof. Waterson and Dr.Subrough. Like this soap factory
was started as a small unit and now it has grown up to a giant size.

RENAMING:
On 1st October 1980, the Government Soap Factory was renamed as
Karnataka Soaps and Detergent Limited The Company was registered as a
public limited company. Today Company produces varieties of products in
the toilet soaps, detergent, Agarbathies and Cosmetics.

OBJECTIVES OF KS & DL:

To serve the national economy
K.L.E. Societys Academy of Business Management

22

Analysis of Funds Flow Statement

To attain self reliance
To promote and uphold its image as symbol of traditional products
To promote purity and quality products and thus enhance age old
charm of Sandalwood Oil
To build upon the reputation of Mysore Sandal soap based on pure
sandal oil.
To maintain the brand loyalty of its customer.

VISION STATEMENT:
Keeping pace with globalization, global trends and the states policy
for using technology in every aspect of governance.
Ensuring global presence of Mysore Sandal products while leveraging
its unique strengths to take advantage of the current technology
scenario by intelligent and selective diversification.
Secure all assistance and prime status from Government of India, all
technology alliances.
Further, ensure Karnatakas pre-eminent status as a proponent and
provider of technology services to the world, nation, other states
public and private sectors.
Making available technology product and services at the most
affordable price to the people at large, in keeping with the policy of a
welfare state.
Making all out efforts to achieve unimaginable profits.
Most importantly to earn the invaluable foreign exchange, both to the
state and to the country.
K.L.E. Societys Academy of Business Management

23

Analysis of Funds Flow Statement

COMPETITORS OF KS&DL PRODUCTS AND SERVICES:

KS&DL is facing cut-throat competition in national and international
market. Some of its main competitors are:M/S. Hindustan Uni Lever Ltd.,
M/S. Godrej Soaps Private Ltd.,
M/S. Proctor& Gamble
M/S. Wipro
M/S. Nirma Soaps Private Ltd.,
M/S. Jyothi Laboratories

KS&DL has the following departments:

1)

Finance and Accounts

2)

Human Resources Development & Administration

3)

Research and Development

4)

Quality Assurance

5)

Materials & Stores

6)

Production & Maintenance

7)

Marketing & Business Group

8)

Projects & Management Information Services

HRD DEPARTMENT:
Importance of HRD Department:
K.L.E. Societys Academy of Business Management

24

Analysis of Funds Flow Statement

1)

Management of human resources.

2)

Co-operation

3)

Assisting the management in HR matters

4)

Development of work force.

5)

Work together to achieve organizational goals and

6)

Profit and growth.

KEY FUNCTIONS OF THE HRD:

1)

Recruitment and Selection

2)

Training and Development

3)

Promotion and Transfer

4)

Wages and salary administration

5)

Performance Appraisal

6)

Industrial Relations

7)

Disciplinary Action and

8)

Welfare Measures

TRADEMARK OF KS & DL:

The SHARABHA
K.L.E. Societys Academy of Business Management

25

Analysis of Funds Flow Statement

The carving on the cover is the sharabha, the trademark of KS & DL.
The sharabha is a mythological creation from the puranas which has
a body of a lion and head of elephant, which embodies the combined virtues
of wisdom and strength. It is adopted as an official emblem of KS& DL to
symbolize the philosophy of the company.
The sharabha thus symbolized a power that removes imperfections
and impurities. The maharaja of Mysore as his official emblem adopted it.
And soon took its pride of place as the symbol of the Government Soap
Factory of quality that reflects a standard of excellence of Karnataka Soaps
and Detergent Limited.

SLOGAN:
NATURAL PRODUCTS WITH EXOTIC FRAGRANCES
KS & DL has a long tradition of maintaining the highest quality
standard, right from the selection of raw materials to processing and packing
of the end product. The reasons why its products are much in demand
globally and are exported regularly to UAE, Beharen, Saudi-Arabia, Kuwait,
Qatar, South America. The entire toilet soaps of KS & DL are made from
raw materials of vegetable origin and are totally free from animal fats.

POLICY OF KS&DL:

K.L.E. Societys Academy of Business Management

26

Analysis of Funds Flow Statement

Seek purchase of goods and services from environment responsible
suppliers.
Communicate its environment policy and best practices to all its
employees implications.
Set targets and monitor progress through internal and external audits.
Strive to design and develop products, which have friendly
environmental impact during manufacturing.
Reuse and recycle materials wherever possible and minimize energy
consumption and waste.

BIRDS EYE VIEW OF KS&DL:

1918: Government Soap Factory was started by Maharaja of Mysore
and the Mysore Sandal Soap was introduced into the market
for the first time.
1950: The factory output rose to 500 M.Tons with the following
Modifications.
1. Renovating the whole premises.
2. Installing new boiler soap building plant and drying
Chamber.
1954: Received license from Government to manufacture 1500 tons
of soap and 75 tons of glycerine per year.
1957: Factory shifted its operation to Rajajinagar industrial area.
1974: Mysore sales international limited was appointed as the sole

K.L.E. Societys Academy of Business Management

27

Analysis of Funds Flow Statement

Selling agent, for marketing its products.
1975: Rs.4 Crores synthetic detergent plant was installed
Based on Italian technology by Ballestra SPA.
1980: On 1st October 1980 the Government Soap Factory was
Converted into a public sector enterprise and renamed as
Karnataka Soaps & Detergents Limited.
1981:

a) Production capacity increased to 6000 tons,

b) Rs.5 Crores Fatty Acid Plant was installed.

1984: Manufacturing of premium quality of Agarbathies at Mysore

Division.
1985: Production capacity was raised to 26,000 M.tons Per Annum.
A large variety of toilet soaps at attractive shapes, colors and
Fragrances introduced to meet the varieties & tastes of
Consumers.
1992:The company was registered with the Board for Industries
and Financial Reconstruction (BIFR), New Delhi in December
for rehabilitation, as the company suffered losses
Continuously since 1980 at its net worth fully eroded.
1996:The BIFR approved the rehabilitation scheme in September &
the Company stated making Profits.
1999:ISO-9002 Certificate for quality assurance in production,
Installation and Servicing.
2000:ISO-14001 certificate pertaining to environmental
Management system.

K.L.E. Societys Academy of Business Management

28

Analysis of Funds Flow Statement

2003:The entire carried forward loss of Rs.98 Crores wiped out
And in May BIFR, declared the company to be out of its
Purview. The Company is making profit continuously,
It is only State Public Sector unit has come out of BIFR.
2004:The ISO-9002 was upgraded to ISO-9001-2004, Quality
Certificate.

PRESENT STATUS OF THE COMPANY:

The company is mainly dependent on southern market. The product
availability in retail outlets particularly for Mysore sandal soap is almost
comparable to any other similar industries products in the premium segment
in the south. Whereas in other parts like Eastern & Northern markets
penetration of our product is relatively poor, which depends on the
companys distribution structure, stockist and field personnel strength?
With increased trust on distribution, the company does not foresee any
problems to achieve the projected sales through the redistribution package.
Further, the policy of Indian Government also sees the public sector
enterprises enter the industry in a large way there by making the products
available to the consumers at reasonable prices.
K.L.E. Societys Academy of Business Management

29

Analysis of Funds Flow Statement

Being located in the centre of southern part of India the Government Soap
Factory claims preferential treatment for expansion programme availability
of exotic natural Sandalwood oil.

AN ISO-9002 COMPANY:
KS & DL with a tradition of excellence of over eight decades is
committed customer delight, through total quality management and
continuous improvement through the involvement of all employees.
KS&DL has got ISO 9002 certificate.
To improve the quality management system and to facilitate TQM in
the process of soap and detergent, the management took decision to obtain
ISO-9002 by end of March 1999. Accordingly action play was drawn and a
committee was set up for the purpose during October 1998 with a mission
statement.
According to the company constitution, officers go for the formation
in all the areas of the companys operation. Particularly production,
procurement, quality assurance, store maintenance. The company gives
K.L.E. Societys Academy of Business Management

30

Analysis of Funds Flow Statement

initial training including conducting employees awareness programme,
document quality manual and quality system procurement.
In this direction company obtained the guidance from gualgi
Consultancies, Bangalore and Bureau of Indian Standards, Bangalore.
Accordingly, company standards registered for ISO 9002 by the end of
March to the Bureau of Indian Standards. Obtained the certificate by the end
of March 1999 itself.
This is to project in the national and international market and also to
improve quality of products offered to the consumers with the assurance of
quality in the message.
The Company got itself upgraded to ISO-9001-2004, Quality Systems
in the year 2004-05.

ISO-14001:
The company is located in the heart of the Bangalore city. The
management of the company took a decision to get the ISO-14001 and
become model to other public sector for the techniques used and also to
other Government units to spread the message of maintenance.
ISO-14001 and ISO-9001 will facilitate to improve the corporate
brands in the global market and it will help the company to improve the
profits, year after year on long-term basis. The environment management
system adopted in the company through this motive as follows:
Conservation of energy
K.L.E. Societys Academy of Business Management

31

Analysis of Funds Flow Statement

Conservation of Surrounding
Conservation of resources
Equipped with latest technology and backed by full-fledged control
and R&D support, KS&DL is marching confidentially ahead in the new
millennium. The Company is developing new products to meet the
changing preferences of its customers.

KS&DL AT GLANCE:
Incorporated Name

Karnataka Soaps and Detergents Limited.

Address

Karnataka Soaps and Detergents Limited

Bangalore Pune High Way
Post Box No.5531, Rajajinagar,
Bangalore 560 055
Ph: 080-3377691/3370469/23371103 to 06
22376922 to 24
Email: Mysorsandal @ vsnl.com
Website: www.mysoresandal.com

Year of Establishment 1918

Constitution

Wholly owned by Govt. of Karnataka

Management

Govt. of Karnataka nominates/appoints

K.L.E. Societys Academy of Business Management

32

Analysis of Funds Flow Statement

Board of Directors. Chairman & MD
Renamed

1980

Trademark

The trademark is SHARABHA. It is the

Body of lion with the head of an
Elephant means blending the majesty
Of lion with strength of an elephant.

Production range

Toilet soaps, bar soaps, Detergent Cakes

Powder,Agarbathies, Cosmetics,
Baby products, Sandalwood Oil

Process know how

The facility is a pioneer in the

Manufactures of various soaps and
Technology Imported from Italy.

Capacity of the Unit

Licensed capacity is 26,000 metric

Tons of Soaps & 10,000 M.Tons of
Detergents Per annum

Plants

At Bangalore
Soap Plant
Detergent Plant
Fatty Acid Plant

K.L.E. Societys Academy of Business Management

33

Analysis of Funds Flow Statement

At Mysore
Sandal wood Oil
Agarbathies
At shimoga
Duty Paid Godown

THE BIRTH OF A LEGEND:

The early year of the 20th century witnessed the birth of a magical
formula, created from the finest and purest sandalwood oil, better known as
liquid gold, distilled exclusively at our divisions in Karnataka-Mysore. A
fragrant gift to the world from the first Government Soap Factory of India.
Nurtured by the Maharaja of Mysore. Enriched with all the goodness of
natural sandal wood oil, this unique soap captured hearts and markets at
home, as well as right across the globe creating a fragrant legacy for the state
of Karnataka. Soaps and Detergents limited (KS&DL) is the true inheritor
of this golden legacy of India. Continuing the tradition of excellence for
over eight decades, using only the best Grade sandal wood oil in its product
range. KS&DL today in one of the largest producers of Sandal wood oil and
sandal wood soaps in the world.

K.L.E. Societys Academy of Business Management

34

Analysis of Funds Flow Statement

PRODUCT MANUFACTURED BY KS&DL:

TOILET SOAP:
NAME OF THE PRODUCT

UNITS OF GRAMS

Mysore Sandal Soap

75

Mysore Sandal Classic Soap

75

Mysore Sandal Gold Soap

125

Mysore Sandal Baby Soap

75

Mysore Special Sandal Soap

75

Mysore Rose Soap

100

Mysore Sandal Herbal Care Soap

100

Mysore Jasmine Soap

100 & 75

Mysore lavender Soap

150

Mysore Sandal bath tablet

150

K.L.E. Societys Academy of Business Management

35

Analysis of Funds Flow Statement

Mysore Sandal classic bath tablet

150

Mysore Jasmine bath tablet

150

Mysore Special Sandal tablet

150

Mysore Sandal rose tablet

150

Mysore Sandal Guest tablet

17

DETERGENTS:

NAME OF THE PRODUCT

UNITS IN GRAMS

Mysore detergent powder

1000

Mysore detergent powder

500

Mysore detergent Cake

125

Mysore detergent

250

K.L.E. Societys Academy of Business Management

36

Analysis of Funds Flow Statement

TALCUM POWDERS:
NAME OF THE PRODUCT

UNITS IN GRAMS

Mysore Sandal Talc

20, 50, 100, 300

Mysore Sandal Baby Talc

100, 200, 400

AGARBATHIES:

NAME OF THE PRODUCT

Mysore Sandal Premium

Mysore Sand

Mysore Rose

Nagachampa

Suprabhatha

Mysore Jasmine

Parijatha

Sir M.V.100

Bodhisathva

Venkateshwara

Durga

Ayyappa

Alif Laila

Meditation

K.L.E. Societys Academy of Business Management

37

Analysis of Funds Flow Statement

SWOT ANALYSIS OF KS&DL:

STRENGTHS:
Only soap in India that contains pure sandal and almond oil.
Certified by ISO
Worlds largest production of sandal wood oil.
Brand name from decades in soap market.
It has very good dealership network in South which ensures that the
products reach every customer.
Diversified product range helps the company to maintain stability.

WEAKNESSES:
Distribution network weak in north and east.
Absence of television advertisement
Neglecting freshness aspect.
High oriented cost due to excessive labour force.
Low turnover resulting in low profit.

OPPORTUNITIES:
Traditional benefits that sandal is good for skin
Skin care is just gaining importance among consumers
K.L.E. Societys Academy of Business Management

38

Analysis of Funds Flow Statement

Government support and large production capacity.
Advantages of being in the industry for a long time.
Existence of vast market and huge demand.

THREATS:
Other competitors such as Rexona, Moti, Santoor etc.
There is a need for renovation of plant and machinery.
Government Policy may reduce growth potential.
Other sandal soaps in the market

CLASSIFICATION OF EMPLOYEES AT KS&DL

1.

Permanent Employee: one who has been engaged for work on a

permanent basis.
2.

Temporary Employee: One who has been engaged for work, which is

essentially of temporary nature and likely to be finished within a limited

period.
3.

Probationary Employee: One who is provisionally employed to fill a

permanent vacancy.

K.L.E. Societys Academy of Business Management

39

Analysis of Funds Flow Statement

4.

Casual Workmen: One who is engaged on day to day basis, for casual

or non recurring work.

5.

Trainee: Trainee is a learner who may or may not be paid stipend

during the period of training.

MAIN PRODUCTION HIGHLIGHTS OF THE COMPANY

Fatty Acid Plant, Bangalore
Toilet Soap Plant, Bangalore
Detergent Plant, Bangalore
Talcum Powder Plant at Peenya, Bangalore

Sandalwood oil factory, Mysore

Sandalwood oil factory, Shimoga

CHAPTER 4

ANALYSIS & INTERPRETATION

OF FINANCIAL STATEMENT
FINANCIAL STATEMENT:
Financial statements (or financial reports) are formal records of a
business' financial activities. These statements provide an overview of a
business' profitability and financial condition in both short and long term.
There are four basic financial statements:

K.L.E. Societys Academy of Business Management

40

Analysis of Funds Flow Statement

Balance sheet: also referred to as statement of financial position or

condition, reports on a company's assets, liabilities and net equity as
of a given point in time.

Income statement: also referred to as Profit or loss statement, reports

on a company's results of operations over a period of time.

Statement of retained earnings: explains the changes in a company's

retained earnings over the reporting period.

Statement of cash flows: reports on a company's cash flow activities,

particularly its operating, investing and financing activities.

FINANCIAL STATEMENT ANALYSIS:

Evaluation of a firm's financial statements in order to assess the firm's
worth and its ability to meet its financial obligations

TABLE 1:
SCHEDULE OF CHANGES IN WORKING CAPITAL [2003-2004]

PARTICULARS
CURRENT ASSETS
*Inventories
*Sundry Debtors
*Cash & Bank Balance
*Loans & Advances
Total of CA(A)

AMOUNT
2003

AMOUNT
2004

238364853
264554988
195668600
64406069
762994510

374078417 135713564
104230598
160324390
246496702 50828102
104755619 40349550
829561336

K.L.E. Societys Academy of Business Management

EFFECT ON WC
Increase
Decrease

41

Analysis of Funds Flow Statement

CURRENT LIABILITIES
*Sundry Creditors
*Advance from customer
*Trade Deposit
*Other Liabilities
*Provisions
Total of CL(B)
WC=A-B
NET DECREASE IN WC

30207570 110579522
18177624 29514949
9139057
8136517
70837282 62569554
73092874 79767089

80371952
11337325
1002540
8267728
6674215

201454407 290567631
561540103 538993705 236161484 255707882
22546398 22546398
561540103 561540103 255707882 255707882

TABLE 2:
CALCULATION OF FUNDS FROM OPERATION
PARTICULARS

AMOUNT

Closing Balance of 2004

1710352

(Add) Miscellaneous Expenses

10714157

(Less) Depreciation

18813081

(Less) Opening Balance of the Year

990562

FUNDS LOST IN OPERATION

7379134

TABLE 3:
FUNDS FLOW STATEMENT [2004]
SOURCES

AMOUNT

APPLICATION

K.L.E. Societys Academy of Business Management

AMOUNT
42

Analysis of Funds Flow Statement

Secured Loan

20200619 Repayment of

Sale of Fixed Asset

Decrease in WC

Unsecured Loan
17887917 Funds Lost in Operation
22546398

TOTAL

60634934

TOTAL

53255800
7379134

60634934

FINDINGS:
Funds flow statement exhibits as to how the resources are used in the
business.
In the year 2003-04, there was a decrease in Working Capital by
Rs.22546398. This was mainly due to decrease in Sundry Debtors by
Rs.160324390, and it was also due to increase in Sundry Creditor, Advance
from Customer and Provision by Rs.80371952, 11337325 & 6674215
respectively.
However, there was increase in Inventories, Sundry Debtor and Loans
& Advances by Rs.135713564, 50828102 & 40349550 respectively and
decrease in Trade Deposits & Other Liabilities by Rs.1002540 & 8267728
respectively, which did not affect much.

K.L.E. Societys Academy of Business Management

43

Analysis of Funds Flow Statement

Not only Working Capital is decreased, even trading activities are also
showing loss (Funds lost in operation) of Rs.7379134.
During this year, the company received additional Secured Loan by
Rs.20200619 and sold some Fixed Assets for Rs.17887917. Then, using
those funds, the company repaid the Unsecured Loan by Rs.53255800.

GRAPH 1:

GRAPH 2:

K.L.E. Societys Academy of Business Management

44

Analysis of Funds Flow Statement

TABLE 4:
SCHEDULE OF CHANGES IN WORKING CAPITAL [2004-2005]

PARTICULARS
CURRENT ASSETS
*Inventories
*Sundry Debtors
*Cash & Bank Balance
*Loans & Advances
Total of CA(A)
CURRENT LIABILITIES
*Sundry Creditors
*Advance from customer
*Trade Deposit
*Other Liabilities

AMOUNT
2004

AMOUNT
2005

EFFECT ON WC
Increase
Decrease

374078417
104230598
246496702
104755619
829561336

443774512
80322402
112205761
124457821
760760496

69696095

110579522
29514949
8136517
62569554

52996473
47066003
15287400
91701489

57583049

K.L.E. Societys Academy of Business Management

23908196
134290941
19702202

17551054
7150883
29131935
45

Analysis of Funds Flow Statement

*Provisions

79767089

Total of CL(B)
WC=A-B
NET DECREASE IN WC

88833899

9066810

290567631 295885264
538993705 464875232 146981346 221099819
74118473 74118473
538993705 538993705 221099819 221099819

TABLE 5:
CALCULATION OF FUNDS FROM OPERATION
PARTICULARS

AMOUNT

Closing Balance of 2005

-25572563

(Add) Depreciation

720741

(Less) Miscellaneous Expenses

314123

(Less) Opening Balance of the Year

1710352

FUNDS LOST IN OPERATION

26876297

TABLE 6:
FUNDS FLOW STATEMENT [2005]
SOURCES
Secured Loan
Decrease in WC

TOTAL

AMOUNT
APPLICATION
9650151 Repayment of

AMOUNT
55000000

Unsecured Loan
74118473 Purchase of Fixed Asset
Funds Lost in Operation

1892327
26876297

83768624

83768624

K.L.E. Societys Academy of Business Management

TOTAL

46

Analysis of Funds Flow Statement

FINDINGS:
In the year 2004-05, there was a decrease in Working Capital by
Rs.74118473. This was mainly due to decrease in Sundry Debtor and Cash
& Bank balance by Rs.23908196 & 134290941 respectively and also due to
increase in Current Liabilities like Advance from Customer, Trade Deposits,
Other Liabilities and Provisions by Rs.17551054, 7150883, 29131935 &
9066810 respectively.
However, there was increase in Inventories and Loans & Advances by
Rs.69696095 & 19702202 respectively and decrease in Sundry Creditor by
Rs.57583049, which did not affect much.
Not only working capital is decreased, even trading activities are also
showing loss (funds lost in operation) of Rs.26876297.
During this year, the company received additional secured loan by
Rs.9650151.Then using that funds the company repaid the unsecured loan
by Rs.55000000 and purchased some fixed assets for Rs.1892327.

K.L.E. Societys Academy of Business Management

47

Analysis of Funds Flow Statement

GRAPH 3:

GRAPH 4:

K.L.E. Societys Academy of Business Management

48

Analysis of Funds Flow Statement

SHOWING COMPARISON OF CURRENT LIABILITIES
(2004-05)
120000000 2004
100000000
2005
80000000
2004
Amount 60000000
2005
2005
40000000
2004
2005
20000000
2004
0
*Sundry *Advance *Trade *Other
Creditors From Deposit Liabilities
Customer
Current Liabilities

2004
2005

TABLE 7:
SCHEDULE OF CHANGES IN WORKING CAPITAL [2005-2006]

PARTICULARS
CURRENT ASSETS
*Inventories
*Sundry Debtors
*Cash & Bank Balance
*Loans & Advances
Total of CA(A)
CURRENT LIABILITIES
*Sundry Creditors
*Advance from customer
*Trade Deposit
*Other Liabilities
*Provisions

AMOUNT
2005

AMOUNT
2006

443774512 341214224
80322402 68837157
112205761 195715651
124457821 94458527
760760496 700225559
52996473
47066003
15287400
91701489
888333899

37710415
32717504
19254983
81023455
98239572

K.L.E. Societys Academy of Business Management

EFFECT ON WC
Increase
Decrease
102560288
11485245
83509890
29999294

15286058
14348499
3967583
10678034
9405673
49

Analysis of Funds Flow Statement

Total of CL(B)
WC=A-B
NET DECREASE IN WC

295885264 268945929
464875232 431279630 123822481 157418083
33595602 33595602
464875232 464875232 157418083 157418083

TABLE 8:
CALCULATION OF FUNDS FROM OPERATION
PARTICULARS

AMOUNT

Closing Balance of 2006

-5326504

(Less) Miscellaneous Expenses

3133415

(Less) Depreciation

42405215

(Less) Opening Balance of the Year

-25572563

FUNDS LOST IN OPERATION

25292571

TABLE 9:
FUNDS FLOW STATEMENT [2006]
SOURCES
Sale of Fixed Asset
Net Decrease in WC

AMOUNT
45639392

APPLICATION
Repayment of

AMOUNT
39448184

33595602

Secured Loan
Repayment of

14494239

Unsecured Loan
Funds Lost in Operation

25292571

K.L.E. Societys Academy of Business Management

50

Analysis of Funds Flow Statement

TOTAL

79234994

TOTAL

79234994

FINDINGS:
In the year 2005-06, there was a decrease in Working Capital by
Rs.33595602. This was mainly due to decrease in Inventories, Sundry
Debtor and Loans & Advances by Rs.102560288, 11485245 & 29999294
respectively, and also due to increase in Current Liabilities like Trade
Deposits and Provisions by Rs.3967583 & 9405673 respectively.
However, there was increase in Cash & Bank balance by Rs.83509890
and decrease in Sundry Creditor, Advance from Customer and Other
Liabilities by Rs.15286058, 14348499 & 10678034 respectively, which did
not affect much.
Not only working capital is decreased, even trading activities are also
showing loss (funds lost in operation) of Rs.25292571.
During this year, the company sold Fixed Assets for Rs.45639392.
Then, using those funds, the company repaid the secured loan and unsecured
loan by Rs.39448184 &14494239 respectively.

K.L.E. Societys Academy of Business Management

51

Analysis of Funds Flow Statement

GRAPH 5:

GRAPH 6:

K.L.E. Societys Academy of Business Management

52

Analysis of Funds Flow Statement

TABLE 10:
SCHEDULE OF CHANGES IN WORKING CAPITAL [2006-2007]

PARTICULARS

AMOUNT
2006

AMOUNT
2007

EFFECT ON WC
Increase
Decrease

CURRENT ASSETS
*Inventories
341214224 350855723
9641499
*Sundry Debtors
68837157 80873641 12036484
*Cash & Bank Balance
195715651 312345581 116629930
*Loans & Advances
94458527 72546525
21912002
Total of CA(A)
700225559 816621470
CURRENT LIABILITIES
*Sundry Creditors
37710415 57458701
19748286
*Advance from customer
32717504 29818530
2898974
*Trade Deposit
19254983 18129664
1125319
*Other Liabilities
81023455 187217348
106193893
*Provisions
98239572 115943508
17703936
K.L.E. Societys Academy of Business Management

53

Analysis of Funds Flow Statement

Total of CL(B)
WC=A-B
NET DECREASE IN WC

268945929 408567751
431279630 408053719 142332206 165558117
23225911 23225911
431279630 431279630 165558117 165558117

TABLE 11:
CALCULATION OF FUNDS FROM OPERATION
PARTICULARS

AMOUNT

Closing Balance of 2007

15070293

(Add) Miscellaneous Expenses

8234985

(Less) Depreciation

8972330

(Less) Opening Balance of the Year

-5326540

FUNDS FROM OPERATION

19659452

TABLE 12:
FUNDS FLOW STATEMENT [2007]
SOURCES
Funds from Operation

AMOUNT
APPLICATION
19659452 Repayment of

AMOUNT
69915999

Unsecured Loan
Secured Loan
Sale of Fixed Asset
Decrease in WC
TOTAL

16629120
10401516
23225911
69915999

K.L.E. Societys Academy of Business Management

TOTAL

69915999
54

Analysis of Funds Flow Statement

FINDINGS:
In the year 2006-07, there was a decrease in Working Capital by
Rs.23225911. This was mainly due to decrease in Loans & Advances by
21912002, and also due to increase in Current Liabilities like Sundry
Creditors, Other Liabilities and Provisions by Rs.19748286, 106193893 &
17703936 respectively.
However, there was increase in Inventories, Sundry Debtors and Cash
& Bank balance by Rs.9641499, 12036484 & 116629930 respectively and
decrease in Advance from Customer and Trade Deposits by Rs.2898974 &
1125319 respectively, which did not affect much.
Although there was a decrease in Working Capital during this year,
there was a Trading Profit of Rs.19659452.
During this year, the company sold Fixed Assets for Rs.10401516 and
received additional secured loan for Rs.16629120. Then, using those funds,
the company repaid the unsecured loan by Rs.69915999.

K.L.E. Societys Academy of Business Management

55

Analysis of Funds Flow Statement

GRAPH 7:

GRAPH 8:

K.L.E. Societys Academy of Business Management

56

Analysis of Funds Flow Statement

TABLE 13:
SCHEDULE OF CHANGES IN WORKING CAPITAL [2007-2008]

PARTICULARS
CURRENT ASSETS
*Inventories
*Sundry Debtors
*Cash & Bank Balance
*Loans & Advances
Total of CA(A)
CURRENT LIABILITIES
*Sundry Creditors
*Advance from customer
*Trade Deposit
*Other Liabilities
*Provisions

AMOUNT
2007

AMOUNT
2008

350855723
80873641
312345581
72546525
816621470

296012822
146346670
334385423
104944640
881689555

57458701 82909923
29818530 16469372
18129664 17511200
174632966 191861870
128527890 166770640

K.L.E. Societys Academy of Business Management

EFFECTS OF WC
Increase
Decrease
54842901
65473029
22039842
32398115

25451222
13349158
618464
17228904
38242750
57

Analysis of Funds Flow Statement

Total of CL(B)
WC=A-B
NET DECREASE IN WC

408567751 475523005
408053719 406166550 133878608 135765777
1887169
1887169
408053719 408053719 135765777 135765777

TABLE 14:
CALCULATION OF FUNDS FROM OPERATION
PARTICULARS

AMOUNT

Closing Balance of 2008

136826041

(Add) depreciation

3575312

(Less) Miscellaneous Expenses

15108429

(Less) Opening Balance of the Year

15070293

FUNDS FROM OPERATION

110222631

TABLE 15:
FUNDS FLOW STATEMENT [2008]
SOURCES
Funds from Operation
Net Decrease in WC

AMOUNT
APPLICATION
110222631 Repayment of
Secured Loan
1887169 Repayment of
Unsecured Loan
Purchase of fixed asset
Investment

K.L.E. Societys Academy of Business Management

AMOUNT
6263584
40000000
3699668
30000000
58

Analysis of Funds Flow Statement

TOTAL

Deferred Tax Assets

112109800
TOTAL

32146548
112109800

FINDINGS:
In the year 2007-08, there was a decrease in Working Capital by
Rs.1887169. This was mainly due to decrease in Inventories by
Rs.54842901, and also due to increase in Current Liabilities like Sundry
Creditors, Other Liabilities and Provisions by Rs.25451222, 17228904 &
38242750 respectively.
However, there was increase in Sundry Debtors, Cash & Bank balance
and Loans & Advances by Rs.65473029, 22039842 & 32398115
respectively, and decrease in Advance from Customer and Trade Deposits by
Rs.13349158 & 618464 respectively, which did not affect much.
Although there was a decrease in Working Capital during this year,
there was a Trading Profit (Funds from operation) of Rs.19659452.
During this year, the company used Funds from Operation for
repayment of Secured and unsecured loan by Rs.6263584 & 40000000
respectively and also purchased Fixed Assets, Deferred Tax Assets and made
Investment for Rs.3699668, 30000000 & 32146548 respectively.

K.L.E. Societys Academy of Business Management

59

Analysis of Funds Flow Statement

GRAPH 9:

GRAPH 10:

K.L.E. Societys Academy of Business Management

60

Analysis of Funds Flow Statement

TABLE 16:
SHOWING PERCENTAGE DECREASE IN WORKING CAPITAL
OVER DIFFERENT PERIOD

YEAR
2003-04
2004-05
2005-06
2006-07
2007-08

WORKING CAPITAL

PERCENTAGE

22546398
74118473
33595602
23225911
1887169

DECREASE
---228.73
-54.67
-30.86
-91.87

TRENDS:

K.L.E. Societys Academy of Business Management

61

Analysis of Funds Flow Statement

Working capital goes on decreasing from 228.73% in 2004-05 to
-91.87% in 2007-08. This indicates that the firms short-term financial
position is not favorable. They have to take immediate step to raise shortterm capital.

GRAPH 11:

K.L.E. Societys Academy of Business Management

62

Analysis of Funds Flow Statement

TABLE 17:
SHOWING PERCENTAGE INCREASE OR DECREASE IN
FUNDS FROM OPERATION

K.L.E. Societys Academy of Business Management

63

Analysis of Funds Flow Statement

YEAR

FUNDS FROM

PERCENTAGE

2003-04
2004-05
2005-06
2006-07
2007-08

OPERATION
-7379134
-26876297
-25292571
19659452
110222631

INC/DEC
----2.64
-5.89
-177.72
460.65

TRENDS:
The funds from operation have fluctuated largely in these five years
period. Initially, from 2003-2006, there was funds lost in operation from
2.64% to -5.89%, but later it plunged hugely to yield a positive result from
-177.72% to 460.65% over 2006 through 2008.

GRAPH 12:

K.L.E. Societys Academy of Business Management

64

Analysis of Funds Flow Statement

TABLE 18:
SHOWING THE COMPARISON BETWEEN
CURRENT ASSET & CURRENT LIABILITIES

YEAR

CURRENT

CURRENT

CURRENT

ASSETS

LIABILITIES

RATIO

K.L.E. Societys Academy of Business Management

65

Analysis of Funds Flow Statement

2003

762994510

201454407

3.79

2004

829561336

290567631

2.85

2005

760760496

295885264

2.57

2006

700225559

268945929

2.60

2007

816621470

408567751

1.99

2008

881689555

475523005

1.85

CURRENT RATIOS:
Current ratio may be defined as the relationship between current
assets and current liabilities. This ratio, also known as working capital ratio,
is a measure of general liquidity and is most widely used to make the
analysis of a short-term financial position or liquidity of a firm.
CURRENT RATIO = CURRENT ASSETS/CURRENT LIABILITIES
OR CURRENT ASSETS : CURRENT LIABILITIES

GRAPH 13:

K.L.E. Societys Academy of Business Management

66

Analysis of Funds Flow Statement

TRENDS:
In the year 2008, the current ratio is low by 1.85 when compared to
2003. It indicates that the liquidity position of firm is not good and the firm
shall not be able to pay its current liabilities without facing difficulties.

GRAPH 14:

K.L.E. Societys Academy of Business Management

67

Analysis of Funds Flow Statement

TRENDS:
In all the year, current assets are more than current liabilities. In the
year 2008 current assets is Rs.881689555, more than enough to meet current
liabilities i.e. Rs.475523005.
Even though the current assets are more in 2008, the current liabilities
are also more in 2008 when compared to other year.

TABLE 19:
SHOWING COMPARISON BETWEEN LIQUID ASSETS

K.L.E. Societys Academy of Business Management

68

Analysis of Funds Flow Statement

& LIQUID LIABILITIES

YEAR

LIQUID

LIQUID

LIQUID

2003

ASSETS
524629657

LIABILITIES
48385194

RATIO
10.84

2004

455482919

140094471

3.25

2005

316985984

100062476

3.16

2006

359011335

70420830

5.09

2007

465765747

87277231

5.33

2008

585676733

99379295

5.89

LIQUID RATIO
Liquid Ratio refers to the ability of a firm to pay its short-term
obligations as and when they become due. Cash in Hand, Cash at Bank, Bills
Receivables, Sundry Creditor & Temporary Investments are the more Liquid
Assets.
LIQUID RATIO=LIQUID ASSETS/LIQUID LIABILITIES
OR LIQUID ASSETS : LIQUID LIABILITIES

GRAPH 15:

K.L.E. Societys Academy of Business Management

69

Analysis of Funds Flow Statement

TRENDS:
From 2006-08 liquid ratios is increased by 5.09 to 5.89, it indicates
that the firm is liquid and has the ability to meet its current or liquid
liabilities in time.

GRAPH 16:

K.L.E. Societys Academy of Business Management

70

Analysis of Funds Flow Statement

TRENDS:
In all the year, liquid assets are more than liquid liabilities. In the year,
2008 liquid assets is Rs.585676733, more than enough to meet current
liabilities i.e. Rs.99379295.
Only in 2004 the liquid liabilities is high when compared to other
year.

INVENTORIES:

K.L.E. Societys Academy of Business Management

71

Analysis of Funds Flow Statement

The value of a firm's current assets including raw materials and work
in progress and finished goods.
INVENTORIES TURNOVER RATIO:
Inventories turnover Ratio indicates the number of times the stock has
been turned over during the period and evaluates the efficiency with which a
firm is able to manage its inventories.
Inventory Turnover Ratio = Sales/Average Inventory
Average Inventory=opening stock +closing stock / 2
TABLE 20:
CALCULATION OF INVENTORY TURNOVER RATIO
YEAR

NET SALES

AVERAGE

INVENTORY

INVENTORIES

TURNOVER

2003-04

927449807

306221635

RATIO
3.02

2004-05

1017971027

408926464.5

2.48

2005-06

1109210600

392494368

2.83

2006-07

1195803294

346034973.5

3.45

2007-08

1455284544

323434272.5

4.49

GRAPH 17:
K.L.E. Societys Academy of Business Management

72

Analysis of Funds Flow Statement

TRENDS:
Inventories turnover Ratio measures the velocity of conversion of
stock into sales.
In the year 2007-08, inventories are 4.49 times converted from stock
into sales, it is considered as high inventories.

SUNDRY DEBTOR:
K.L.E. Societys Academy of Business Management

73

Analysis of Funds Flow Statement

A person who owes a creditor; someone who has the obligation of
paying a debt.
The persons who have accounts with the practice and who are at
present in debt to it. The accounts are kept in a sundry debtor's ledger.

DEBTOR TURNOVER RATIO:

Debtor Turnover Ratio indicates the velocity of debt collection of
firm. In simple words, it indicates the number of times average debtors are
turned over a year.
Debtor Turnover Ratio = Sales/Average debtor
Average debtor =opening debtor +closing debtor/ 2
TABLE 21:
CALCULATION OF DEBTOR TURNOVER RATIO
YEAR

NET SALES

AVERAGE

DEBTOR

DEBTOR

TURNOVER

2003-04

927449807

184392793

RATIO
5.02

2004-05

1017971027

92276500

11.03

2005-06

1109210600

74579779.5

14.87

2006-07

1195803294

74855399

15.97

2007-08

1455284544

113610155.5

12.80

GRAPH 18:
K.L.E. Societys Academy of Business Management

74

Analysis of Funds Flow Statement

TRENDS:
In the year 2006-07, Debtor Turnover Ratio is 15.97times the debtors
are turned over during a year. But in the year 2007-08 it was reduced to
12.80times, it indicates that there is inefficient management of debtor and
less liquid debtors.

SUNDRY CREDITOR:

K.L.E. Societys Academy of Business Management

75

Analysis of Funds Flow Statement

A person to whom money is owed by a debtor; someone to whom an
obligation exists.
The persons who have accounts with the practice and who are at
present credit to it. The accounts are kept in a sundry creditors ledger.

CREDITOR TURNOVER RATIO:

Creditor Turnover Ratio indicates the velocity of with which the
creditors are turned over in relation to purchases.
Creditor Turnover Ratio = Sales/Average creditor
Average Creditor =opening Creditor +closing Creditor / 2
TABLE 22:
CALCULATION OF CREDITOR TURNOVER RATIO
YEAR

ANNUAL

AVERAGE

CREDITOR

PURCHASES

CREDITOR

TURNOVER

2003-04

459212552

70393546

RATIO
6.52

2004-05

601444473

81787997.5

7.35

2005-06

524424490

45353444

11.78

2006-07

517587675

47584558

10.87

2007-08

518909473

70184312

7.39

GRAPH 19:

K.L.E. Societys Academy of Business Management

76

Analysis of Funds Flow Statement

TRENDS:
In the year 2005-06, creditor turnover ratio is 11.78times the creditors
are turned over in relation to purchases. From 2006-07 & 2007-08 it was
reduced to 10.87 & 17.39times respectively. It indicates that would be
results in less favorable.

TABLE 23:
SHOWING CHANGES IN FIXED ASSETS
K.L.E. Societys Academy of Business Management

77

Analysis of Funds Flow Statement

YEAR

FIXED

2003

ASSETS
61497582

2004

62422746

2005

63594332

2006

60360155

2007

58930969

2008

59055325
GRAPH 20:

TABLE 24:
SHOWING CHANGES IN CASH & BANK BALANCE
YEAR

CASH & BANK BALANCE

K.L.E. Societys Academy of Business Management

78

Analysis of Funds Flow Statement

2003

195668600

2004

246496702

2005

112205761

2006

195715651

2007

312545581

2008

334385423

GRAPH 21:

TABLE 25:
SHOWING CHANGES IN LOANS & ADVANCES
YEAR

LOANS &
ADVANCES

K.L.E. Societys Academy of Business Management

79

Analysis of Funds Flow Statement

2003

64406069

2004

104755619

2005

124457821

2006

94458527

2007

72546525

2008

104944640

GRAPH 22:

TABLE 26:
SHOWING CHANGES IN PROVISIONS
YEAR

PROVISIONS

2003

73092874

2004

79767089

K.L.E. Societys Academy of Business Management

80

Analysis of Funds Flow Statement

2005

88833899

2006

98239572

2007

128527890

2008

166770640
GRAPH 23:

A SUMMARY OF FINDINGS:
The finance department efficiently operates the funds in Karnataka
soaps and detergents limited. The manager of finance who is actively
involved in monitoring and reviewing the requirements of funds. It is
followed by an integrated business plan and preparation of cash flow
statements; budgets like sales budget, production budget, and other financial
K.L.E. Societys Academy of Business Management

81

Analysis of Funds Flow Statement

statements to estimate the funds required and also compare the actual with
the projected forecasts. It also takes effective steps to correct variations, if it
arises. The finance department has been successful in adhering to the needs
of fund requirements. They are able to obtain borrowings from banks like
secured and unsecured loans and other sources for funds requirements if so
needed.
Working capital goes on decreasing during 2004 through 2008. This
indicates that the firms short-term financial position is not favorable.
The funds from operation have fluctuated largely in these five years
period. Initially, from 2003-2006, there was funds lost in operation,
but later it plunged hugely to yield a positive result over 2006 through
2008.
In the year 2008, the current ratio is low by 1.85 when compared to
2003. It indicates that the firm shall not be able to pay its current
liabilities without facing difficulties.
In all the year, current assets are more than current liabilities. In the
year 2008 current assets is Rs.881689555, more than enough to meet
current liabilities i.e. Rs.475523005. Even though the current assets
are more in 2008, the current liabilities are also more in 2008 when
compared to other years.

K.L.E. Societys Academy of Business Management

82

Analysis of Funds Flow Statement

From 2006-08 liquid ratio has increased by 5.09 to 5.89times, it
indicates that the firm is liquid and has the ability to meet its current
or liquid liabilities in time.
In all the year, liquid assets are more than liquid liabilities. In the year,
2008 liquid assets is Rs.585676733, more than enough to meet current
liabilities i.e. Rs.99379295.
In the year 2007-08, inventories are 4.49 times converted from stock
into sales, it is considered as high inventories.
In the year 2006-07, Debtor Turnover Ratio is 15.97times the debtors
are turned over during a year. But in the year 2007-08 it was reduced
to 12.80times.
In the year 2005-06, creditor turnover ratio is 11.78times the creditors
are turned over in relation to purchases. From 2006-07 & 2007-08 it
was reduced to 10.87 & 17.39times respectively.
In the year 2006-07, there was a decrease in Working Capital by
Rs.23225911. This was mainly due to decrease in Loans & Advances,
and also due to increase in Current Liabilities like Sundry Creditors,
Other Liabilities and Provisions.
In the year 2007-08, there was a decrease in Working Capital by
Rs.1887169. This was mainly due to decrease in Inventories and also
K.L.E. Societys Academy of Business Management

83

Analysis of Funds Flow Statement

due to increase in Current Liabilities like Sundry Creditors, Other
Liabilities and Provisions
During 2006-07, the company sold Fixed Assets and received
additional secured loan, and then using those funds, the company
repaid the unsecured loan.
During 2007-08, the company used Funds from Operation for
repayment of Secured and Unsecured loan, and also purchased Fixed
Assets, Deferred Tax Assets and made Investment.
Although there was a decrease in Working Capital during 2006-07,
there was a Trading Profit of Rs.19659452.
Although there was a decrease in Working Capital during 2007-08,
there was a Trading Profit (Funds from operation) of Rs.19659452.

RECOMMENDATIONS AND SUGGESTIONS:

The overall performance of the organization is satisfactory,
particularly the last two years trading profit is good. But the trading
profit is fluctuating every year. So necessary step should be taken to
maintain the same.
K.L.E. Societys Academy of Business Management

84

Analysis of Funds Flow Statement

The last five year working capital is decrease. Necessary step should
be taken to increase the working capital, so that the organization can
meet its day-to-day working capital requirements.
In the year 2008, the current ratio is low when compared to 2003. It
indicates that the liquidity position of firm is normally good and the
firm shall not be able to pay its current liabilities without facing
difficulties. So necessary steps to be taken to improve current assets.
In the year 2008, a liquid ratio is reduced when compared to 2003, it
indicates that the firm is not in liquid and doesnt have ability to meet
its current or liquid liabilities in time.
Inventories turnover Ratio is fluctuating, so try to maintain the same
level.
There has been decrease in the trend of fixed assets when compared to
last years, so the organization should invest more in long-term fixed
assets and investments.

K.L.E. Societys Academy of Business Management

85