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Programme: IMBA- 1st Year, Semester 2

Course Code: ACC 102, Business and Management Accounting
II
Course Incharge: Dr. Sushil Kalyani
Topic/Question: Cashflow Statement Analysis of Asian Paints
Submitted By: Anannya Malhotra (IM22GMG052)
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What is a Cashflow Statement?

The cash flow statement (CFS) is a financial statement that summarises the
movement of cash and cash equivalents (CCE) that happen in a business. It is
one of the three main Financial Statements of a company. The CFS assesses a
company's ability to manage its cash position, or how successfully it generates
cash to meet debt commitments and support operating expenses.
The Cashflow Statement is divided into 3 main activities- Operating, Investing
and Financing.

 Operating Activities:
It reflects the net cash generated from a company’s operations i.e.,
dealings in goods and services.
Receipts from sales of goods and services, Interest payments, Income tax
payments, Payments made to suppliers of goods and services used in
production, Salary and wage payments to employees, rent payments, are
examples of operating activities.
 Investing Activities:
Investing activities comprise all sources and uses of cash generated by a
company's investments. This category includes asset purchases and sales,
loans paid to suppliers or received from customers, and payments
associated to mergers and acquisitions (M&A). In a nutshell, changes in
equipment, assets, or investments are related to cash from investments.
Because cash is used to purchase new equipment, buildings, or short-term
assets such as marketable securities, changes in cash from investment are
normally termed cash-out items. However, when a firm sells an asset, the
transaction is treated as cash-in when computing cash from investing.
 Financing Activities:
The movement of funds between a business and its owners and creditors
is referred to as financing activities. It focuses on how the company raises
cash and repays its investors. Among the activities are the issuance and
sale of stock, the payment of cash dividends, and the addition of loans.

Importance of Cash Flow Statement

The cash flow statement is important because it is used to measure the cash
position of the business.
 Short-term Planning
 Provides details where the money is spent
 Knowing optimal level of Cash Balance
 Long-term Planning
 Helps in Analysing Working Capital
A cash flow statement is an important indicator of a company's strength,
profitability, and long-term future prospects. The CFS can assist in determining
whether a company has sufficient liquidity or cash to cover its expenses. A CFS
can be used by a corporation to forecast future cash flow, which aids in
budgeting.
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Methods of calculating CFS

The two methods of calculating cash flow are the direct method and the indirect
method.
The Direct Method adds up all of the cash payments and receipts, including
cash paid to suppliers, cash receipts from customers, and cash paid out in
salaries. This method of CFS is easier for very small businesses that use the cash
basis accounting method. These figures can also be calculated by using the
beginning and ending balances of a variety of asset and liability accounts and
examining the net decrease or increase in the accounts. It is presented in a
straightforward manner.
With the Indirect Method, cash flow is calculated by adjusting net income by
adding or subtracting differences resulting from non-cash transactions. Non-cash
items show up in the changes to a company’s assets and liabilities on the
balance sheet from one period to the next. Therefore, the accountant will identify
any increases and decreases to asset and liability accounts that need to be
added back to or removed from the net income figure, in order to identify an
accurate cash inflow or outflow.

Basic Format of CFS

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ASIAN PAINTS
Asian Paints Ltd is an Indian multinational paint company, headquartered in
Mumbai, Maharashtra, India. The company is engaged in the business of
manufacturing, selling and distribution of paints, coatings, products related to
home décor, bath fittings and providing of related services.
Below is the cash flow of Asian Paints for the past 3 years (extracted from
company’s Annual Report).
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2021-22 2020-21 2019-20

A. Cash Flow from Operating
Profit before Tax ₹ 4,194.14 ₹ 4,089.67 ₹ 3,413.03
Adjustments for:
Depriciation & Amortization ₹ 721.56 ₹ 697.47
Interest Income ₹ -71.92 ₹ -40.90
Dividend Income ₹ -27.35 ₹ -16.45
Finance Costs ₹ 70.25 ₹ 71.66
Allowance for doubtful debts ₹ 36.40 ₹ 27.90
Bad debts written off ₹ 0.56
Deffered income from Govt. grants ₹ -1.76 ₹ -2.28
Net unrealised Foreign exchange loss/(gain) ₹ 4.82 ₹ -16.73
Gain on sale of PPE ₹ -40.36 ₹ -18.37
Net gain on modification of leases ₹ -3.53 ₹ -1.72
Net gain arising on financial assets measured at FVPL ₹ -76.09 ₹ -92.28
Shares based Payment expense ₹ 8.52
Provision for expected credit loss ₹ 53.73
Operating Profit before working capital changes ₹ 4,868.41 ₹ 4,698.53
Adjustments for:
Increase in TR ₹ -1,141.62 ₹ -724.39
Increase in financial assets ₹ -158.99 ₹ -242.74
Increase in inventories ₹ -2,153.00 ₹ -297.14
Increase in other assets ₹ -11.81 ₹ -234.99
Increase in TP ₹ 593.44 ₹ 960.72
Increase in other financial liabilities ₹ 232.16 ₹ 190.10
Increase in other liabilities and provisions ₹ 140.75 ₹ 123.47
Cash generated from Operating Activities ₹ 2,369.34 ₹ 4,473.56
Income Tax paid(net of refund) ₹ -1,109.03 ₹ -1,014.98
Net Cash generated from Operating Activities ₹ 1,260.31 ₹ 3,458.58 ₹ 2,407.47
B. Cash Flow From Investing Activities
Purchase of PPE ₹ -402.91 ₹ -211.32
Sale of PPE ₹ 27.29 ₹ 25.56
Payment for acquiring right of use assets ₹ -12.14 ₹ -7.14
Investment in subsidiary ₹ -79.99
Purchase of NCI ₹ -0.50
Sale of NCI ₹ 146.46 ₹ 272.32
Purchase of Term Deposits ₹ -1,048.19 ₹ -897.11
Proceeds from maturity of term deposits ₹ 897.11 ₹ 458.01
Sale/(Purchase) of current investment ₹ 61.03 ₹ -139.34
Interest recd ₹ 56.20 ₹ 46.91
Dividend recd from subsidiary ₹ 8.64
Dividend recd from others ₹ 15.16 ₹ 7.81
Net Cash used in Investing Activities ₹ -339.98 ₹ -436.16 ₹ -774.65
C. Cash Flow from Financing Activities
Repayment of non current borrowings ₹ -7.89 ₹ -5.90
Proceeds from Non current Borrowings ₹ 1.96
Acceptances(net) ₹ 86.12 ₹ 115.17
Repayment of lease liabilities ₹ -183.24 ₹ -158.71
Finance cost paid ₹ -68.41 ₹ -69.36
Purchase of Treasury shares by ESOP ₹ -74.95
Dividend paid ₹ -1,740.95 ₹ -466.06
Net Cash used in Financing Activities ₹ -1,989.32 ₹ -582.90 ₹ -2,095.25
Net (decrease)/Increase in Cash and Cash Equivalents (A+B+C) ₹ -1,068.99 ₹ 2,439.52 ₹ -462.43
Add: cash & cash equivalents as on 1st april ₹ 3,133.58 ₹ 694.06 ₹ 1,156.36
Cash and Cah equivalents as at 31st march ₹ 2,064.59 ₹ 3,133.58 ₹ 694.06

Prepared on MS Excel

Extra Information
Market Cap: 3.00 trillion INR
Last Traded Share Price (15.05.23) = Rs. 3128.50
No. of shares= 95.92cr
ROE= 24.66%
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EPS= Rs. 42.75

Facts
1. Net Cash & Cash Equivalents at the end increased tremendously from
Rs.694.06 in FY2019-20 to Rs. 3133.58 in FY2020-21, and further reduced
to Rs. 2064.59 in FY2021-22.
2. Cash generated from Operations increased from Rs.2407.47 (FY2019-20)
to Rs.3458.58 (FY2020-21) and then decreased to Rs.1260.31 in FY2021-
22.
3. Net cash used in Investing was Rs.774.65 in FY2019-20, Rs.436.16 in
FY2020-21 and Rs.339.98 in FY2021-22.
4. Net cash used in Financing was Rs.2095.25 in Fy2019-20, Rs.582.9 in
Fy2020-21 and Rs.1989.32 in FY2021-22.
5. NPBT was Rs.4194.14, highest in FY2021-22

Observations
1. Profit before tax is increasing over the years.
2. Net cash generated from Operations is comparatively low in FY2021-22
because of increase in Current Assets of the company.
3. Company has been spending good amount on purchase of PPE, especially
in FY2021-22. This is an indication of growth.
4. Interest and Dividend received is increasing year after year.
5. Net cash used in Financing has increased as company is focusing on
paying back loans and liabilities.
6. Also, large amounts of dividend are paid in FY2021-22.

Other Observations
Looking at other statements, have drawn some more information.
1. In the last three years, the company's revenue has increased by
15.40%.
2. Over the last three years, the company has maintained a
respectable ROE of 27.33%.
3. Over the last three years, the company has maintained a
respectable ROCE of 36.70%.
4. The company is almost debt-free.
5. The company has a favourable interest coverage ratio of 60.70.
6. The Cash Conversion Cycle of the organisation is -4.93 days.
7. With a current ratio of 2.26, the company has a strong liquidity
position.

Competitors Performance
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Conclusion
Asian Paint is a long-standing corporation that is a market leader in the
paint industry. The company is doing well and has grown significantly over
the years. Asian Paints has been synonymous with paints due to its
innovative and inventive marketing and advertising techniques.