Dilmah is Sri Lanka’s most perceived global brand of tea and also the first producer owned tea brand which was considered as the sixth-largest tea brand in the world in 2009.The organization was established in 1988 by Merrill J Fernando. The name Dilmah was picked by consolidating the primary names of Fernando’s children Dilhan and Malik. (Anon., 2018) Dilmah Ceylon Tea Company PLC was incorporated in 1981 and is headquartered in Peliyagoda, Sri Lanka. Dilmah Ceylon Tea Company PLC is a subsidiary of MJF Teas (Private) Limited. The organization was some time ago known as Ceylon Tea Services PLC and changed its name to Dilmah Ceylon Tea Company PLC in October 2016.
Dilmah Ceylon Tea Company PLC uses Dilmah as the brand name to market its products in srilanka as well as other countries. Marketing activities of the company is carried out by its subsidiary company MJF Beverages (Private) Limited. Dilmah Ceylon Tea Company PLC also offers its tea products online, and exports its product to countries such as the United Kingdom, Turkey, Lithuania, Pakistan, Poland, Russia, Hungary, Canada, Chile, South Africa, Australia, Indonesia, Japan, the United States and New Zealand. (Anon., 2018)
1.1 About the Tea Industry,
The Tea industry was first introduced to Sri Lanka in 1867 by James Taylor, a British planter who arrived in 1852. (Anon., 2018)Tea industry is one of the main sources of income of srilanka which accounts for about 2% of the country’s GDP. Tea industry contributes over US $1.5 billion to the economy of Sri Lanka in 2013.Srilanka is the fourth largest producer of tea worldwide. Srilanka was the largest tea exporter in 1995, with 23% of the total world export. The highest production of 340 million kg was recorded in 2013, while the production was marginally reduced to 338 million kg in 2014.however; currently Kenya has gained a larger share of the market through increased exports. (Anon., 2018)
The following report will explain the company’s cash flow statement and the standards adopted by the company in detail.
2.0 Statement of cash flows of the company
The amount of cash or cash-equivalent which the company gets or gives out by the method for payment to creditors is known as cash flow. Cash flow analysis is frequently used to analyze the liquidity position of the company. It gives a preview of the amount of cash coming into the business, from where, and cash flowing out. (Anon., 2018).
Dilmah Ceylon Tea Company PLC presents its cash flow statement using the indirect method. It starts with profit before income tax expense, followed by additions to or subtractions from that amount to adjust the profit before tax to a total cash flow. Changes in the account balances of items found in current assets and current liabilities on the balance sheet are added or subtracted thereafter. Then the company arrives at its cash balance at the year end (Anon., 2018)
Dilmah Ceylon Tea company PLC statement of cash flow statement which are divided into three are explained in detail as follows,
2.1 Cash flow from operating activities
Operating cash flow is a measure of the cash generated or used by a company in a given period solely related to its core operations. Operational cash flow is not the same as profit after tax, which includes transactions that did not involve actual transfers of money. (Anon., 2018)
Dilmah generates larger amount of cash from its operating activities than other activities of the company. Major cash inflows of the company are from its core business where major the outflows of the company are income tax paid; interest paid and defined benefit costs paid. Following are the cash inflows and outflows from operating activities aggregated of both company and its subsidiary in the year 2017 and 2016 of Dilmah Ceylon Tea PLC.
2.2 Cash flow from investing activities
Cash flow from investing activities reports the total change in a company’s cash position resulting from investment gains or losses and changes resulting from amounts spent on investments in capital assets, such as plant and equipment. (Anon., 2018)
When analyzing Dilmah’s cash flow statement, The only cash inflow to the company is from the proceeds from disposal of PPE while others are cash out flows. The final net cash flow indicates a negative balance but it does not indicate the poor performance of the company it is due to high investment expenditure made by the company in the year 2016/17. Following are the cash inflows and outflows from investing activities aggregated of both company and its subsidiary in the year 2017 and 2016 of Dilmah Ceylon Tea PLC
2.3 Cash flow from financing activities
Cash flows from financing activities is the last of the three sections of a statement of cash flows. It represents the cash inflows that the company took in from the providers of finance such as creditors and outflows related to the shareholders of the company. (Anon., n.d.)
Company has paid out Rs.400, 000,000 of dividends to its shareholders in the year 2017 which is a outflow and as a inflow loans obtained by the company can be identified.
Following are the cash inflows and outflows from financing activities aggregated of both company and its subsidiary in the year 2017 and 2016 of Dilmah Ceylon Tea PLC
Dilmah PLC has a net increase in cash and cash equivalents of Rs.1, 489,450,000 at the end of the year 2017 which indicates that the company is in a stable financial position. Following table shows the aggregated net increase in cash and cash equivalent of both company and its subsidiary in the year 2017 and 2016 of Dilmah Ceylon Tea PLC