The Balance Sheet and Cash Flow Statement

The one non-negotiable rule

Total assets = total liabilities + equity. Every time, without exception.

At one year-end: total assets of ₹464.85 crore, exactly equalling total liabilities and equity of ₹464.85 crore. This is not a rounding convenience — it is the defining structural property of the statement. If the two sides do not match, something in the underlying bookkeeping is wrong.

The asset side

• —Net block ₹149.91 crore — plant, property and equipment after depreciation: gross block ₹450.03 crore less ₹300.12 crore accumulated depreciation. Two-thirds of the gross block is already written down, which tells you something about the age of the asset base.
• —Receivables ₹69.22 crore — owed by customers who have not yet paid.
• —Inventory ₹60.61 crore — unsold goods and materials.
• —Cash ₹175.10 crore, up from ₹140.19 crore — a rise the cash flow statement has to explain.

The claims side

Debt of ₹130.00 crore, reduced each year by a scheduled ₹10 crore repayment. Payables of ₹50.70 crore owed to suppliers. And equity: ₹82.00 crore of share capital plus ₹187.15 crore of reserves = ₹269.15 crore, the shareholders’ residual claim on whatever is left after everyone else is paid.

Why profit alone isn’t enough

Net profit for the year was ₹48.42 crore. Cash grew by ₹34.90 crore. Both numbers are correct and they are genuinely different — and if you cannot explain the gap, you cannot trust either in isolation.

Profit includes non-cash items like depreciation and is shaped by timing — revenue recorded before the customer pays. The cash flow statement strips all of that out and asks one blunt question: how much actual cash moved, and from where?

Three sections that must tie out

• —Operating: +₹85.60 crore — cash from the core business, starting at net profit and adjusting for non-cash items and working-capital movements.
• —Investing: −₹30.05 crore — capital expenditure on plant and equipment.
• —Financing: −₹20.65 crore — ₹10.00 crore debt repayment plus ₹10.65 crore dividends paid.

85.60 − 30.05 − 20.65 = ₹34.90 crore, exactly the increase in cash on the balance sheet. Opening cash ₹140.19 crore + ₹34.90 crore = closing cash ₹175.10 crore. Every number ties by construction. If yours doesn’t, you have found an error, not an exception.

Operating cash flow above profit — good or bad?

Operating cash flow of ₹85.60 crore sits well above net profit of ₹48.42 crore. Warning sign?

Generally the healthy direction. Depreciation is a real but non-cash charge of ₹43.50 crore this year, and working-capital movements are adding cash rather than consuming it.

The pattern genuinely worth investigating is the opposite one: operating cash flow running persistently below net profit. That is where earnings-quality questions start.

Common mistakes

• —Reading the balance sheet as a record of the year rather than a single-day snapshot.
• —Treating a large cash balance as proof of health without checking what generated it.
• —Classifying capital expenditure as operating, or interest and dividends inconsistently.
• —Assuming profit and cash should be close, and ignoring the gap when they aren’t.
• —Reading net block without the gross block and accumulated depreciation behind it.