Cash flows

- Key for survival

 Cash Flow Statement
Exercise
Cash flow from Operating Activities:
Profit before Tax 16,500
Depreciation 1,000
Changes in Current Assets:
Debtors (3,000)
Current Liabilities 1,000
Income Tax paid (7,000)
Net Cash generated by Operating Activites 8,500

Operating activities include

the cash effects of revenue
and expense transactions.
 Cash Flow Statement
Exercise
Cash flow from Financing Activities:
Share Capital 2,000
Dividend Paid (2,000)
Repayment of Loan (1,000)
Net Cash generated by Financing Activities (1,000)

Financing activities include the

cash effects of transactions with
the owners and lenders.
 Cash Flow Statement
Exercise
Cash flow from Investing Activities:
Fixed Assets purchased (3,500)
Investment in securities (6,000)
Net Cash generated by Investing Activities (9,500)

Investing activities include the

cash effects of purchasing and
selling assets.
 Cash Flow Statement
Exercise
Net Cash generated by Operating Activites 8,500
Net Cash generated by Financing Activities (1,000)
Net Cash generated by Investing Activities (9,500)
Net increase/(decrease) in cash and cash
equivalents during the period (2,000)
Cash and cash equivalents at the beginning of the
year 5,500
Cash and cash equivalents at the end of
the year 3,500
Solution to Working Capital Exercise
Period
Inputs (Months) RM WIP FG Debtors Total
Raw Material
In Stock 1 15 15
In WIP 0.5 7.5 7.5
In FG 1 15 15
In Debtors 3 45 45
82.5
Manufacturing Expenses
In WIP 0.5 2.5 2.5
In FG 1 5 5
In Debtors 3 15 15
22.5
Overhead
In FG 1 12.5 12.5
In Debtors 3 37.5 37.5
50
15 10 32.5 97.5 155.00

Working Notes:
Raw Material Consumed Per month 6 X 30 / 12 = Rs. 15 Lakhs
Mfg Exps Per Month 6 X 10 / 12 = Rs. 5 Lakhs
Overhead Per Month 6 X 25 / 12 = Rs. 12.5 Lakhs
Profit Per Month 6 X 15 / 12 = Rs. 7.5 Lakhs
 Solution to Part B:
• Let, gross Working Capital = x
• therefore, Cash balance = 0.05x
• x = 155 Lakhs+ 0.05x
• or 0.95 x = 155 Lakhs
• or x = Rs. 163.16 Lakhs.
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