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Financial Statement Analysis

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Financial Statement Analysis-FIN621
VU
Lesson-17
FINANCIAL STATEMENTS
(Continued)
Cash flow from Investing Activities: Much information is obtained from changes in related Asset
Accounts.
Purchase & Sale of Marketable Securities (AI No: 1) Dr in Marketable Securities A/C shows
Purchases, and hence cash outflow of Rs.65, 000. Cr of Rs.44, 000 in the A/C shows sale and hence
cash inflow. Income Statement shows loss of Rs.4, 000 on these sales. Therefore cash proceeds from
sales = Rs.40, 000 i.e. 44,000 ­ 4,000 (loss).
Loans made to borrowers (AI No: 2) Dr in Notes Receivable shows Loans given and hence outflow of
Rs.17, 000. Cr in Notes Receivable shows Loans collected and hence cash inflow of Rs.12, 000.
It should be re-emphasized that the amount involved here is on account of Principal of
loans. Interest, as already stated is credited to Interest Revenue Account and is included in Operating
Activities.
Cash paid to acquire plants (AI No: 3)
Cash paid to acquire new plants shows cash outflow (160,000); sale of plant assets with
book value of Rs.44, 000 shows cash Inflow. Income statement shows gain of Rs.31, 000 on this. This
means  that cash proceeds from sale of plant assets amounted to Rs.75, 000/-.
Investing Activities' portion of cash flow statement would be:-
Purchase of Marketable securities
(65,000)
Loans made to borrowers
(17,000)
Purchase of plant assets
(160,000)
(242,000)
Proceeds from sale of securities
40,000
Collection of Loans
12,000
Proceeds from sale of plant assets
75,000
127,000
Net cash flow from Investing Activities
(115,000)
Cash flow from financing Activities (A 1 No.1 to 5)
Proceeds from short-term borrowings in lieu of Notes Payable show cash inflow of
Rs.45, 000. Payments to settle debts shows cash outflow of Rs.55, 000/-. Proceeds from issuing bonds
show cash inflow of Rs.100,000 and proceeds from issuing capital stock also show cash inflow of
Rs.50,000 (1000 shares x Rs.50/share) Divided paid, of course involves cash
outflow of Rs.40,000.
Financing Activities' portion of cash flow statement would be:
Rs._____
Proceeds from short-term borrowings
45,000
Proceeds from issuing bonds payable
100,000
Proceeds from issuing capital stock
50,000
195,000
Payment to settle short-term debts
(55,000)
Dividends paid
(40,000)
(95,000)
Net cash flow from financing activities
100,000
Net increase (decrease) in cash
63
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Financial Statement Analysis-FIN621
VU
Rs.____
Net cash flow from Operating Activities
50,000
Net cash flow from Investing Activities
(115,000)
Net cash flow from Financing Activities
100,000
Net increase (decrease) in cash
35,000
Cash & Cash equivalent beginning of the year
40,000
Cash & Cash equivalent end of the year
75,000 (tallies with the first item on
===== Additional Information Sheet)
Note that net cash flow from Operating Activities is Rs.50, 000 against net income of Rs.65, 000 shown
on Income Statement.
MOOSA CORPORATION
Statement of Cash Flows
For the Year Ended June 30, _____
Cash Flows from operating activities:
Rs.
Cash received from customers ..............................
870,000
Interest and dividends received ............................
10,000
Cash provided by operating activities ......... ........................
880,000
Cash paid to suppliers and operating expenses......
(764,000)
Interest paid ..................................................
(28,000)
Income taxes paid ........................................
(38,000)
Cash disbursed for operating activities .....................................
(830,000)
Net cash flow from operating activities ....................................
50,000
Cash flows from investing activities:
Purchases of marketable securities
(65,000)
Proceeds from sales of marketable securities .........
40,000
Loans made to borrowers ....................................... (17,000)
Collections on loans ..........................................
12,000
Purchases of plants assets ..................................... (160,000)
Proceeds from sales of plant assets .....................
75,000
Net cash used by investing activities.................................
(115,000)
Cash flows from financing activities:
Proceeds from short-term borrowing ....................
45,000
Payments to settle short-term debts ....................
(55,000)
Proceeds from issuing bonds payable .................
100,000
Proceeds from issuing capital stock ....................
50,000
Dividends paid ...................................................  (40,000)
Net cash provided by financing activities...................................
100,000
Net increase (decrease) in cash ...............................................
35,000
Cash and cash equivalents, beginning of year .........................
40,000
Cash and cash equivalents, end of year ..................................
75,000
64