DATA ANALYSIS AND INTERPRETATION Data analysis and interpretation will give a clear view about cash inflows and cash outflows and their impact on the functioning of the banks. Cash management is all about how well the cash inflows and cash outflows are managed. Inflows would be the various deposits and investments with banks. Outflows would be the various types of loans granted by banks. Generally a cash flow statement can be studied under three main activities: 1. Operating activities: Cash flow from operating activities is a section of the cash flow statement that provides information regarding the cash generating abilities of a Bank’s core activities. Cash flow from operating activities is generally calculated according to the following formula: Cash Flow from Operating Activities = Net income + Noncash Expenses + Changes in Working Capital The noncash expenses are usually the depreciation and/or amortization expenses listed on the firm's income statement. A statement of cash flows typically breaks out a company's cash sources and uses for the period into three categories: cash flows from operations, cash flows from investing activities, and cash flows from financing activities. Cash flows from operations primarily measures the cash-generating abilities of the company's core operations rather than from its ability to raise capital or purchase assets. Because working capital is a component of cash flow from operations, investors should be aware that companies can influence cash flow from operating activities by lengthening the time they take to pay the bills (thus preserving their cash), shortening the time it takes to collect what’s owed to them (thus accelerating the receipt of cash), and putting off buying inventory (again thus preserving cash). It is also important to note that companies also have some way about what
items are or are not considered capital expenditures, and the investor should be aware of this when comparing the cash flow of different companies. It is important to note that cash flow is not the same as net income, which includes transactions that did not involve actual transfers of money (depreciation is common example of a noncash expense that is included in net income calculations but not in cash flow calculations). It is important to note that Cash helps companies expand, develop new products, buy back stock, pay dividends, or reduce debt. This is why some people value cash flow statements more than just about any other financial statement or measure out there, including earnings per share it's also why many analysts look to cash flow from operations for insight into the core of a company's cash-generating engine. Almost all cash flow measures are influenced heavily by the state of a company’s cash from operations, which in turn is heavily influenced by a company’s net income. Thus, higher revenues, lower overhead, and more efficiency are big drivers of cash flow from operating activities. For these reasons, investors often hunt for companies that have high or improving cash flow from operations but low share prices the disparity often means the share price will soon increase. This cash flows from operating activities can be shown in the form of table by comparing it with the previous year cash flows statements. Cash flows from operating activities relating to last three years i.e., 2009, 2010 and 2011.
Cash Flows from Operating Activities: SI.No.
Particulars
1
OPERATING ACTIVITIES
i.
31.03.2009
31.03.2010
31.03.2011
Balance of profit and loss account adjusted for:
1629.39
1933.10
2157.54
provisions and contingencies
231.18
102.19
592
depreciation on fixed assets
170.21
177.67
154.08
profit on sale of assets
-0.93
-1.27
-5.14
additional provision on investment
-
-0.19
-98.36
advances written off
-52.63
-
-4.77
depreciation on investment written back
-245.62
-
loss on sale of investment
-
-
137.46
decrease in cash reserve
52.63
0.89
4.77
cash flow from operating activities prior to the
1784.23
2211.5
2937.58
net (increase)/decrease in operating assets
-
-
-
fixed deposits with banks
-5568.36
3537.04
374.00
investments
-2507.26
-9687.71
2274.20
advances to borrowers
-5245.21
-7843.10
-14836.1
other operating assets
-159.60
-154.09
-53.23
net (increase)/decrease in operating liabilities
-
-
-
deposits from depositors
12413.12
14590.93
12172.81
borrowings
-
-
1000.00
other operating liabilities
159.41
214.01
-145.26
cash flow from operating activities prior to other
876.33
2868.58
3724.00
payment of ex-gratia
-142.61
-125.92
-132.86
payment out of employees welfare fund
-3.79
-5.15
-4.61
income tax paid
-456.00
-539.18
-655.25
fringe benefit tax paid
-6.5
-
-
payment out of common good fund
-9.01
-16.30
-11.25
contribution to co-operative educative fund
-9.93
-11.67
-13.94
CASH FLOW FROM OPERATING
248.49
2170.36
2906.09
effect of changes in assets and liabilities:
ii.
payments:
ACTIVITIES
So by referring to the above table Cash flow from operating activities is generally calculated according to the following formula: Cash Flow from Operating Activities = Net income + Noncash Expenses + Changes in Working Capital. Where Net income = carried forward balances of the last three years profit and loss balances. Non cash expenses would includes transactions that did not involve actual transfers of money ie., depreciation on fixed assets, provisions and contingencies etc., all these are added back to net income. Changes in working capital would the difference between net increase or decrease in changes in operating assets and liabilities of the bank. The following data could be presented in the form of a graph:
60 54%
50 40%
40 30 20 10
6%
0 2009
2010
2011
So by referring to the above table and graph it can be known that: •
There was a Increase in profits of the banks from Rs.1629.39 crores in 2009 to Rs.2157.54 crores in 2011 i.e., the cash flows from operating activities have been raised from 6% to 40% then to 54% in 2011.
•
There was in increase in cash flow from operating activities because:
•
There was No loss on sale of investments in 2009, 2010.
•
There was Profits on sale of assets in all the 3 years.
•
Fixed deposits of the banks were also grown at a constant rate.
•
There were no borrowing by the banks in 2009, 2010 and instead there was a huge amount of deposits with banks.
•
so the cash flows from operating activities is increasing with a increase in profits of the bank.
2. Investing activities: Cash from investing activities is a section of the cash flow statement that provides information regarding a bank's purchases or sales of capital assets. Cash flow from investing activities primarily reflect the company's purchases or sales of capital assets (that is, assets that appear on the balance sheet and have a useful life of more than one year). It is important to note that companies have some way about what items are or are not considered capital expenditures, and the investor should be aware of this when comparing the cash flow of different companies. It is important to note that Companies and investors always like to see positive cash flow from every aspect of a company's operations. After all, without positive cash flow, a company may have to borrow money to do these things, or in worse cases, it may not stay in business. However, having negative cash flow for a time is not always a bad thing. If a company is a net spender of cash for a time because it is building a second manufacturing plant, for example, the company's might show negative cash from investing activities. Nonetheless, this could pay off for investors later if the plant generates more cash. On the other hand, if the company has a negative cash flow from investing activities because it is making poor asset-purchase decisions, then the long-term benefit might not be there. It is important to note that cash flow is not the same as net income, which includes transactions that did not involve actual transfers of money (depreciation is common example of a noncash expense that is included in net income calculations but not in cash flow calculations). Investors often hunt for companies that have high or improving cash flow but low share prices the disparity often means the share price will soon increase. This cash flows from investing activities can be shown in the form of table and graph by comparing it with the previous year cash flows statements. Cash flows from investing activities relating to last three years i.e., 2009, 2010 and 2011.
Cash Flows from Investing Activities: SI.No.
Particulars
31.03.2009
31.03.2010
31.03.2011
2.
INVESTING ACTIVITIES purchase of fixed assets(net of sales)
-111.38
-133.77
-2348.40
CASH FLOW FROM INVESTING ACTIVITIES
-111.38
-133.77
-2348.40
cash flows from investing activities 4%
5% 2009
91%
2010 2011
It can be interpreted from the above table that there was an purchase of fixed assets in the previous years 2009, 2010 and 2011 which are nothing but cash outflows for the bank so in the statement form the amounts are shown with minus signs because these are the cash flows which are going out of the bank and there were no cash inflows in the previous years ie., amount being realized in the form of sale from investments. So by referring to the above graph cash flows from investing activities was 4% , 5% and 91% in 2009, 2010 and 2011 respectively.
By referring to the tables of cash flows operating and cash flows investing activities the difference in the rates in cash from investing activities is due to the following: •
In the year 2009, 2010 the bank has invested less in purchase of fixed assets because the bank has efficient amount of fixed deposits with it.. The amount of cash was sufficient to carry on its operations.
•
Where as in the year 2011 the bank has invested more on purchase of fixed assets because the deposits from depositors in the year 2009, 2010 were Rs. 12413.12 crores , Rs. 14590.93 crores and in 2011 the deposits were only Rs.12172.81 crores which is less when compared to the deposits of 2009, 2010.
•
And also there was no borrowings by the bank in 2009, 2010 but in 2011 the bank borrowed Rs.1000.00 crores for carrying out its operations.
•
And also the income tax paid during the year 2011 was more i.e., Rs.655.25 crores when compared to the previous years 2009, 2010 the amount being Rs. 456.00crores, Rs.539.18 crores respectively.
•
So these were the main reasons due to which the cash flows from investing activities were more in 2011 ie., 91% when compared to the previous years 2009 and 2010 which were only 4% and 5%.
3. Financing activities: The section of the cash flow statement titled Cash Flow from Financing Activities accounts for inflows and outflows of cash resulting from debt issuance and financing, the issuance of any new stock, dividend payments, and any repurchase of existing stock. This cash flows from financing activities can be shown in the form of table and graph by comparing it with the previous year cash flows statements. Cash Flows from Financing Activities: SI.No.
Particulars
31.03.2009
31.03.2010
31.03.2011
3
FINANCING ACTIVITIES share capital received
90.66
153.03
192.52
entrance fee received
10.6
10.42
10.1
dividend paid
-227.86
-280.49
-307.19
CASH FLOW FROM FINANCING ACTIVITIES
-126.6
-117.04
-104.57
cash flows from financing activities
31%
36%
2009 2010 2011
33%
•
It can be interpreted from the above table that cash flows from financing activities in the year 2009 , 2010 and 2011 is 36%, 33% and 31% respectively.
•
The bank raises the cash with the help of share capital and receives Rs.90.66 crores, Rs.153.03 crores, Rs.192.52 crores in the years 2009, 2010 and 2011 respectively.
•
Where as the dividend paid in all the three years is more than the total amount received there by the balances with the bank becomes negative.
•
So initially there was inflow of funds in banks but due to the more payment of dividends the figures are being shown negative sign there by there was an more grant of dividends in the following years which resulted into more of outflow of cash from the bank.
FINDINGS: •
It can be known from the various activities of the bank that:
•
In case of operating activities the bank is very well able to manage all its funds in a systematic and proper manner. And as the cash from operating activities is in a increasing state because of the profits relating to the years are increasing i.e., it had increased from Rs.1629.39 crores in 2009 to Rs.2157.54 crores in 2011.
•
In case of investing activities in the year 2009,2010 the bank has invested less in purchase of fixed assets because the bank has efficient amount of fixed deposits with it.. The amount of cash was sufficient to carry on its operations.
•
Where as in the year 2011 the bank has invested more on purchase of fixed assets because the deposits from depositors in the year 2009, 2010 were Rs.12413.12 crores,Rs. 14590.93 crores and in 2011 the deposits were only Rs.12172.81 crores which is less when compared to the deposits of 2009, 2010.
•
In case of cash flows from financing activities in the year 2009 , 2010 and 2011 is 36%, 33% and 31% respectively.
•
The bank raises the cash with the help of share capital and receives Rs.90.66 crores, Rs.153.03 crores, Rs.192.52 crores in the years 2009, 2010 and 2011 respectively.
•
Where as the dividend paid in all the three years is more than the total amount received there by the balances with the bank becomes negative.
•
So over all the bank is operating at moderate level and is managing cash at the best optimum level to carry out the operations effectively and efficiently.
