1. Which of the following will be treated as Cash and cash equivalents?a. Balance in the Current Account with State Bank of Indiab. Investment in the shares of a subsidiary companyc. Investment in 10 year government bonds maturing after 2 monthsd. Investment in Equity Mutual Fundse. Fixed Deposit with Canara Bank maturing after 1 year

Out of the above only a) and c) will be classified as Cash & cash equivalents as they are readily convertible into cash without any significant risk of change in value. Investment in shares of a subsidiary company (b) and Fixed Deposit (e) above are long term investments and hence are not treated as cash equivalents. Whereas investment in equity mutual fund (d) above though can readily be converted into cash, but it carries significant risk of change in value and hence is not treated as cash equivalent.

2. From the given Profit and Loss Account and additional information from the Balance

Sheet ascertain the Cash Flow from Operating Activities for Samurai Toys Limited for

the year 2010-11.

Profit & Loss Account for the year ended 31st March 2011

Income Crores

Sale Revenue 168.75

Interest earned 22.43

Total Income 191.18

Less: Expenses

Material Consumed 67.47

Employees Cost 23.34

Administrative and Marketing Expenses 37.89

Depreciation & Amortization 18.56

Interest and Finance Charges 13.45

Profit Before Tax 30.47

Provision for Tax 10.00

Profit After Tax 20.47

Additional Information

The company paid `8 Crores towards taxes during the year.

The following details were extracted from the Balance Sheet of the Company

31st March 2010 31st March 2011

Inventories 43.24 55.15

Sundry Debtors 39.77 30.43

Sundry Creditors 26.89 20.45

Other Current Liabilities 7.75 11.34

Cash Flow from Operating Activities of Samurai Limited for the year 2010-11

Particulars Amount (`Crores)

Profit Before TaxAdd:

- Depreciation and Amortization- Interest & Finance Charges

Less: - Interest earned

30.47

18.5613.45

(22.43)

Profits Before Working Capital ChangesAdd:

- Decrease in Sundry Debtors- Increase in Other Current Liabilities

Less:- Increase in Inventories- Decrease in Sundry Creditors

9.343.59

(11.91)(6.44)

Profit after Working Capital ChangesLess:

- Taxes paidCash Flow from Operating Activities

34.63

(8.00)26.63

3. As on 31st March 2011, the cash and cash equivalents of Muscles Power Limited stood at

`945 million as compared to `1014 million in the previous year’s Balance Sheet. During

the year the company generated a net cash flow of `844 million from its operating

activities and used a net amount of `1235 million towards investing activities. What are

the net cash flows from financing activities?

Change in Cash & Cash Equivalents ` Million

Balance at the end of the year 945

Less: Balance in the beginning of the year 1014

Net decrease in cash and cash equivalents ( 69)

The sum of cash flow under three heading should be equal to -`69 million.

Cash Flow from (Operating Activities + Investing Activities + Financing Activities) = Net

Change in Cash and Cash Equivalents

`844 - `1235 + Financing Activities = -`69 million

-`391 + Financing Activities = -`69 million; solving the equation

Cash Flow from Financing Activities = `322 million.

The company raised a net cash flow of 322 million from financing activities during the year.

4. On the basis of information given fill the missing entries:

Particulars Start up Ltd.

Mature Ltd

Expand Ltd

Cash Rich Ltd.

  `Crores

Increase or decrease in Cash         Cash & Cash Equivalent        -          at the end of the year 42.34 235.27 ? ?-          at the beginning of the year 3.28 ? 235.67 256.17 Increase or (decrease) in cash ? 51.78 -100.69 ?

Cash Flow during the year                i.            Operating Activities -5.78 ? 334.89 580.79      ii.            Investing Activities -102.47 -276.38 ? -221.12    iii.            Financing Activities ? -104.73 349.09 ? Net Cash Flow (i+ii+iii) 39.06 51.78 ? 177.49

Solution:

The completed table is shown below.

Particulars Start up Ltd.

Mature Ltd

Expand Ltd

Cash Rich Ltd.

  `CroresIncrease or decrease in Cash         Cash & Cash Equivalent        -          at the end of the year 42.34 235.27 134.98 433.66-          at the beginning of the year 3.28 183.49 235.67 256.17 Increase or (decrease) in cash 39.06 51.78 -100.69 177.49

Cash Flow during the year                i.            Operating Activities -5.78 432.89 334.89 580.79      ii.            Investing Activities -102.47 -276.38 -784.67 -221.12    iii.            Financing Activities 147.31 -104.73 349.09 -182.18 Net Cash Flow (i+ii+iii) 39.06 51.78 -100.69 177.49

Preparation and Interpretation of Cash Flow Statement – Container Corporation of India Limited

From the abridged Profit & Loss Account as on 31st March 2010, excerpts from the Balance Sheets as on 31st March 2009 and 2010 and additional information, prepare the Cash Flow Statement of the company for the year ended 31 st March 2010.

Profit & Loss Account for the year ended 31st March 2010 Excerpts from the Balance Sheet as on 31st March

Income from Operations3705.6

8 Interest and Dividend Income 148.41 2010 2009Other Operating Income 31.64 Inventories 6.99 5.08 Debtors & Other Recoverable 207.8 212.3

Total Income3885.7

3 Current Liabilities483.5

7482.3

9 Provision for Employee Benefits 23.71 17.86

Misc Expenses2744.0

2Depreciation and Amortization 135.1Provision for doubtful debts 0.02Prior Period Adjustment -0.49

Total Expenses2878.6

5

Profit Before Tax1007.0

8 Provision for Tax 219.92Tax Adjustment for earlier year -0.47 Profit After Tax 786.69

Additional Information

i) The company paid `368.49 Crores toward direct taxes during the year.ii) The company acquired fixed assets (capital work in progress and advances) costing

`303.30 and made investments aggregating to `37.46 Crores.iii) An advance of `6 Crores was made to a subsidiary company.iv) Some old assets were sold during the year for a consideration of `0.14 Crore.

v) Dividend paid during the year amounted to `181.98. In addition corporate dividend tax of `30.94 Crores was also paid during the year.

Solution

Net Profit Before Tax 1007.08Adjustment for :- Depreciation/Amortization 135.1Interest & Dividend Income -148.41Provision for doubtful debts/advances 0.02Decrease in Trade & Other Receivables 4.5Increase in Inventories -1.91Increase in Trade Payable & Provision 7.03 1003.41Direct Taxes paid -368.49Cash Flow from Operating Activities 634.92 Investing Activities Purchase of Fixed Assets -303.3Sale of Fixed Assets 0.14Purchase of Investment -37.46Interest, Dividend & Other Income 148.41Advances/loans - Joint Ventures & Subsidiary -6.00Cash flow from Investing Activities -198.21 Financing Activities Dividend paid (including tax on dividend) -212.92Cash flow from Financing Activities -212.92 Opening Balance of Cash & Cash Equivalents 1765.72Closing Balance of Cash & Cash Equivalents 1989.51Increase in Cash & Cash Equivalents 223.79